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Burning questions over huge coal-buying contract
View(s):The Government has awarded a contract for 1.9 million metric tonnes of coal to a foreign company at a much higher price than what the Government is paying for spot purchases of coal, documents obtained by the Sunday Times show. A one-year contract to supply 1.9 million metric tonnes of coal has gone to a company named Swiss Singapore Overseas Enterprise (Pte) Ltd at a price of US$ 58 a metric tonne. However, Lanka Coal Company (LC) has been buying coal via three spot tenders for less than the price being paid to Swiss Singapore.
One spot tender was for US$ 55.70 a metric tonne, the second was for US$ 51.29 while the price came down to US$ 49.85 in the third instance. “So you can see the coal market trend. The prices are coming down,” an authoritative source said.
The decision to award the tender to Swiss Singapore was taken by a Standing Cabinet Appointed Procurement Committee (SCAPC) which recommended that the term contract be given out at US$ 8.15 more per metric tonne of coal than the lowest spot tender price.
This means Sri Lanka is paying US$ 15.485 million (Rs. 2.224 billion) extra for 1.9 million metric tonnes of coal when compared with the lowest spot tender price. Coal procurement has been mired in controversy ever since the Lakvijaya Coal Power Plant came into operation. There has been ferocious bidding by several foreign companies. At the last round, differences broke out over the awarding of the contract to Swiss Singapore.
The LCC first called tenders in April 2015 to buy 6,750,000 tons of coal for Lakvijaya on a three-year contract. The deal was worth around Rs. 50 billion. Seven bidders were shortlisted by a Technical Evaluation Committee (TEC) that had been appointed by the Standing Cabinet Appointed Procurement Committee (SCAPC). One was disqualified.
The TEC made its choice after examining the tenders but a dispute broke out over its choice of supplier—Swiss Singapore. Four of the shortlisted bidders then went to the Procurement Appeal Board (PAB). The PAB finally evaluated all the tenders and ruled that the contract could not be awarded to Swiss Singapore. “In view of the above observations made, PAB does not endorse the recommendation made by TEC/SCAPC to award the contract for the supply of coal to Lakvijaya Power Plant, Puttalam, to M/s. Swiss Singapore Overseas Enterprises Pte Ltd., Singapore, at the price stated in the SCAPC report dated 03.07.2015 based on the reevaluation of the price proposals,” it held.
“Accordingly, PAB recommends to the Cabinet of Ministers to cancel the tender and call for fresh bids internationally, after making changes to the tender conditions, if necessary,” it said. Authoritative sources said, however, that the tenders were not cancelled. Nor were fresh bids called. Instead, the SCAPC recommended that Swiss Singapore get the contract.