The Hon. Arkam Ilyas - Deputy Minister of Power

Hon. Presiding Member, I thank you for the opportunity. I first thank Hon. S. M. Marikkar, who brought this motion, and Hon. Ajith P. Perera, who seconded it, because it gives the Government benches the chance to set out the full facts on the 2025–2026 coal tender. The motion begins with errors. Those who governed under “good governance” from 2015 for five years now come here without even knowing the country’s coal requirement. They cite 12.32 million tonnes; that is wrong. For this year, the requirement was about 2.258 million tonnes. Around 0.6 million tonnes remained from the previous tender cycle. We ordered about 1.58 million tonnes this year. Even from their own text, one can see they have contradicted themselves. They also say we awarded to a company without financial strength, experience, quality, or adequate ethical standing. False. This was not an open tender but a closed international tender. Before calling bids, we pre-register suppliers who meet our specifications, quality and capacity, and financial criteria. Only those prequalified suppliers could bid. They claim we ignored the Auditor General and COPF. Not true. COPF’s work referenced the Auditor General’s report of 30.09.2022, which, at clause 7.2, recommended relaxing certain specs lawfully to increase competition. Why? Because in the earlier three-year tender, some tried to push US$324 per metric tonne. That was halted. In our cycle, we awarded at US$98 per tonne—huge savings. Had that three-year attempt gone through, we would still be paying US$324 today. Our Hon. Harsha de Silva chaired COPF then; his Committee’s recommendation was to implement the Auditor General’s guidance. We did exactly that in the 2023 tender. We have not deviated since. No new Auditor General or COPF report has contradicted that. Fear is being stoked by distorting facts. Let me also recall the past 15 years. Multiple tenders were run. Sometimes the process was flawed. In 2014, seven ships were rejected for NCV below 5,900 kcal/kg; penalties were recovered on only four, and those too were small—just hundreds of thousands of dollars—whereas today we recover in the millions. There was a serious error from September 2015 to April 2016 in calculating penalties on voyages 79 to 114: due purely to a miscalculation, the then State Minister caused a loss of US$1.575 million to the CEB. The case is still in court and the money has not been recovered. I table the relevant document—placed in the Library. We are also in litigation with Liberty Commodities; if we recovered those sums, we could even shave a few cents off tariffs. We will never defend the supply of off-spec coal. If coal delivered does not meet the contracted standard, the supplier is liable; we have no allegiance to any company, and we act accordingly. This is not new: from 2011 to 2021, penalties of about US$5.6 million were imposed in 2014–2016 and 2020–2021; in 2021–2022 about US$8 million. This is how the system has always worked. On this cycle, some say the tender should have been open for 42 days but we closed it at 21. We did so with full approval of the National Procurement Commission, and we then extended by seven days upon request from registered suppliers. A record 11 bidders participated. We allowed the full 14-day appeal period; not a single appeal was filed. If there were real defects, there would have been appeals or lawsuits. There were none—because the process was sound. Another canard is that “we saved Rs. 1,000 million last year” through a post-award offer. What really happened was this: for 2024–2025, a company won the tender. Then, someone without prequalification and without even three years in the business came along claiming they could do it cheaper. The Tender Board rightly rejected that as unlawful. It was then taken to Cabinet and approved anyway. That sends a terrible signal to international suppliers—that even if you bid and win properly, Cabinet might hand the award to a favourite. The winning company is a global top-10 firm; after such treatment, why would they bid here again? We have reversed that reputation by awarding, 100 percent correctly, to the company that won the tender. On alleged “losses” at Lakvijaya: last year’s coal price was around US$120/MT; this year it is US$98/MT. That alone yields approximately Rs. 10.5 billion in savings to the country. As for quality calculations, the contractual standard keys off the load-port NCV and is finalized at the discharge port. We compare both. Decisions on penalties, acceptance, or rejection are based on the discharge-port certificate. There is a “bomb calorimeter” at Lakvijaya, but plant-side spot readings are not the contractual basis; they are compared against the independent discharge-port certificates. I examined recent shipments with a bomb calorimeter for cross-checking. Of 11 shipments from the previous supplier, four were below 5,900 kcal/kg; under that logic, there should have been about Rs. 1 billion in penalties, but that did not happen. The real issue we have noted now is plant performance trending low. We are asking whether either the load or discharge reports were manipulated—or whether the issue is on our side. The discharge-port inspector was selected by open tender in 2023. We have therefore appointed a special committee, including university experts, through the Ministry to investigate thoroughly. If they find wrongdoing, we will impose penalties, and if warranted refer matters to the CID; those responsible will be punished. Unlike in 2016, we will ensure recoveries are made. On tariffs: the CEB has requested a 13.56 percent revision based on its quarterly forecasting model—not because of any coal issue. After we came to office, the CEB first sought a 5 percent increase; PUCSL recommended a 20 percent reduction, and we reduced by 20 percent. Later, CEB sought an 18 percent increase; PUCSL advised 15 percent; we allowed 15 percent. In the last quarter, CEB sought +11.9 percent; PUCSL advised –6 percent; we adopted that. A new PUCSL determination is due by end-March. We do not expect a large change. There is no need for public anxiety; we have no desire to raise tariffs unnecessarily. Finally, on our path: we committed to reduce bills by a third, and that requires a cost-reflective framework alongside lowering generation costs. Today, roughly 80 percent of our US$500 million annual power-sector spend is on generation. Our plan is to cut that sharply by accelerating low-cost renewables and storage. Where some were paying Rs. 24 per unit to certain suppliers, new wind projects are coming in well below that; new solar awards that were Rs. 37 per unit are being brought down—to around Rs. 27 and, in new procurements, near Rs. 17. As the projects we have kicked off reach commercial operation in two to three years, we expect generation costs to fall by around 30 percent—about a third. The Ministry of Power and the Government are executing on this. There is no cause for alarm; we will deliver. Thank you.