A shipment of coal imported for Lak vijaya power plant does not meet the quality standards required, according to serious accusations being levelled by the opposition and over social media.

Referring to this, MP D.V. Chanaka said in parliament yesterday (07) the loss from low quality coal amounted to Rs. 10 billion.

Energy minister Kumara Jayakody gave an explanation in response.

Given below are particulars of the first coal shipment imported by Trident Champion, the new supplier to the plant:

* A requirement to be fulfilled by the supplier, mentioned clearly as per condition 5.1 in the procurement process is the calorific value should be between 5900 and 6150.

* The 60,000 mt shipment was loaded at South Africa’s Richards Bay Coal Terminal (RCBT) and since that port’s certificate gives a quality measure as per requirements, unloading was carried out.

Depending on quality certificates being matched, Lanka Coal Company issues a letter of acceptance for 80 percent of payments. However, that payment has not been completed yet due to certain flaws in documentation.

* Final payments are made following the issuance of the unloading port’s quality certificate by Cotecna Inspection India (Pvt.) Ltd. that has been chosen for the purpose by the CEB.

* That certificate is due within 10 days, or by 16 January, of unloading. If that finds a quality lower than specified in the loading port’s certificate, payments are made once a fine is imposed within the parameters of the quality requirements.

* An important clarification here is with regard to the calorific value which determines the quantity of energy generated – higher that value means a higher energy generation.

As per clause 5.2 of the procurement agreement, if a shipment gets rejected, it allows for the imposition of twice the fine as per clause 5.6.

A sample testing done at Lakvijaya plant’s laboratory with unloading yet to be completed has found the calorific value to be 5689-5739-5760 and 5430, which are lower than the required level.

However, that cannot be considered to be valid, since testing should be carried out at an accredited laboratory. Lakvijaya plant’s laboratory is without that accreditation.

From last year’s orders, the plant has coal stocks required until February-end. Nevertheless, testing has been done for a sample from the latest shipment which has even been used for energy generation, said the minister.

Supplier’s selection

Furthermore, a ministry statement issued in response to MP Chanaka’s accusation said the selection of supplier has been carried out in accordance with international competitive limited bidding.

Twenty suppliers have been registered, and the requirements have not been altered for any of them.

It said that during the previous regime, a selected supplier had been given the tender with cabinet approval being considered as the sole qualification.

Bidding period

Advice from the National Procurement Commission was obtained to change the bidding period for the registered suppliers.

A highest number of bidders, 10 in this instance, coming forward makes it clear a change in the timeframe for the bidding has had no impact.

Time between awarding of contract and performance bond placement

No delay has occurred in the placement of performance bond following the awarding of the contract as per procurement documents. The supplier placed it within 14 days.

Lakvijaya plant’s laboratory

As per agreement, the supply and payment process occurs in consideration of quality certificates issued by the ports of loading and unloading. Lakvijaya plant’s laboratory, where a sample testing was performed, is not an accredited one.

Laboratory testing reports

Loading port’s laboratory testing report

The letter of acceptance is issued and unloading begins only if the shipment’s quality certificate from the port of loading complies with Lakvijaya plant’s requirements.

The supplier proposed three laboratories to perform sample testing at Richards Bay Coal Terminal, and one was chosen after establishing its accreditation by the Sri Lankan diplomatic missions in the respective countries. The quality certificates are issued by Mithra SK.

The shipment in question is within the required quality levels as per the laboratory certificate issued at the port of loading.

Anyhow, 80 pc of payments that should have been made by now, has not happened.

Quality certificate at port of unloading

The final payment is made as per the laboratory testing at the port of unloading. For that, Lakvijaya plant selects an accredited laboratory.

Here, testing is done on a sample from a mixture of 12 samples randomly chosen from each of the 5,000 mts. It takes around 10 days within completion of unloading, or by 16 January, for the issuance of that report.

Since that report is yet to be issued, a clear idea on this shipment’s quality cannot be expressed.

As per agreement, a supply gets rejected allows for the imposition of twice the fine.

Claim of a Rs. 10 billion loss

Hence, the claim of a Rs. 10 billion loss is mere imagination. If the shipment is found to be of low quality, twice the fine is imposed and no financial loss will occur as claimed by the MP.

With the official laboratory report due by 16 January, the entire process will take place as per the procurement agreement, added the ministry statement.