Pakistan's Power Division (PD) has uncovered major inefficiencies in how imported coal is purchased by power plants and has introduced new policy guidelines intended to reduce electricity costs by up to Rs 380 million ($1.37 million) annually.

The findings emerged from a series of high-level meetings led by Federal Minister for Power Sardar Awais Ahmed Khan Leghari. According to a statement issued on August 25, officials examined actual procurement data, contract terms and market behavior instead of depending on reports or external inquiries.

The PD noted that Pakistan operates a coal-fired generation fleet of roughly 5.28 GW that depends partially or fully on imported coal. This includes three large 1.32 GW facilities at Port Qasim, Hub Power, and Sahiwal, along with the Lucky and Jamshoro plants, which can also run on imported fuel.

To remain operational, these plants must sign coal supply contracts with international suppliers, PD said. While imported coal prices are typically tied to global benchmarks, the final price paid by a plant also hinges on the discount negotiated with the supplier.

The review found a wide gap in discounts obtained by different power plants. Some were buying coal from the same supplier under the same international benchmark yet receiving discounts ranging from $0.25-7.12/t.

Meanwhile, a single supplier offered significantly difference discounts to different plants. In certain cases, backup supply deals carried smaller discounts than primary agreements, and some plants were receiving coal from suppliers with lower discounts even though contracted suppliers with better rates were available, PD added.

The PD emphasized that the discrepancy matters because fuel costs are passed on to consumers through tariffs. Any avoidable rise in procurement expense adds directly to the burden on households and businesses.

As an immediate step, policy guidelines are being formally sent to the National Electric Power Regulatory Authority to enforce stronger transparency, uniformity, and competition in coal buying.

The first phase introduces a principle called the "best available discount", requiring plants to purchase from contracted suppliers offering the largest discount against the relevant international benchmark. Plants will no longer be allowed to buy from a supplier offering a smaller discount.

The measure is expected to generate savings of about Rs 380 million per year without any additional investment, simply by ensuring purchases are made at the most favorable rates already available.

Energy Minister Leghari stated that the initiative is not about interfering in commercial operations but about making sure that when fuel costs are ultimately charged to consumers, procurement is carried out efficiently and with full transparency.