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Coal tender in quagmire: Bid winner makes fresh demands over LCs
View(s):Sri Lanka’s latest coal tender has also run into problems, with the Indonesian company it was awarded to requesting a change to a crucial term that Lanka Coal Company (Pvt) Ltd (LCC) has deemed unacceptable, authoritative sources told the Sunday Times.
The hitch is likely to cause delays in procuring crucial coal supplies beyond March, they warned, adding that it was essential to replenish stocks before the monsoons set in to keep the Lakvijaya plant running without interruption, thereby avoiding protracted power interruptions.
LCC Chairman Shehan Sumanasekera said that to avoid any immediate shortfall, the company had requested the previous supplier to advance its shipments.
“We had outstanding cargo with the previous supplier which we advanced from March and April to February and March,” he said, adding that those two months were now covered. Problems will arise from April onwards, if supplies were not locked in soon.
After one competitive coal tender ended in failure last year, the Cabinet authorised LCC to order 720,000 metric tonnes of coal from a Sri Lanka-Indonesia joint venture firm called M/s Concept Global-PT Arista Mitra Jaya on an unsolicited tender.
(In November last year, the Cabinet had sanctioned LCC to buy coal on government-to-government contracts and unsolicited proposals after competitive term and spot tenders were deemed non-responsive.) One of the main requirements, however, was six months’ credit to LCC, which has struggled in recent months to secure rupee payments from its cash-strapped customer, the Ceylon Electricity Board.
The selected Indonesian company agreed to six months of credit but requested transferrable letters of credit (LCs), saying it would be buying coal from other parties who were members of a cooperative. While the Bank of Ceylon provided the required LCs, Arista Mitra’s bank refused to allow transfers.
The Indonesian company then made a request that Sri Lankan authorities could not agree with, the sources said. “It wanted the LC to be made out to a different bank but also under a different company name than Arista Mitra,” they explained, adding that the Indonesian firm has been asked to provide additional documents which it hasn’t yet done.
Two other coal suppliers were named in the Cabinet paper, in case Arista Mitra does not deliver: Haris Australia Pty Ltd and Coral Energy DMCC of the United Arab Emirates. A third company, Combasst Industry Development Co. Ltd. of Hong Kong has still failed to provide authenticated documents to be considered for a contract.
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