Loss from inferior coal tops Rs. 18.3 b

• Expert committee report tabled in Parliament puts quantified losses at Rs. 15.7 b
• Rs. 7.1 b from higher coal burn, Rs. 8.6 b for replacement power, further Rs. 2.3 b emergency procurement premium
• PUCSL says losses understated as hydropower valued at zero and diesel at subsidised prices
• Only 19 of 25 planned shipments under Trident contract arrived; figure nearly double PUCSL’s Rs. 8.5 b estimate for first nine

Inferior-quality coal has led to losses amounting to Rs. 18.3 billion, Parliament’s Sectoral Oversight Committee on Infrastructure and Strategic Development Chairman, SJB MP S.M. Marikkar said yesterday, tabling an expert committee report on the losses.

The report, dated 7 October, 2026, puts the additional cost and financial loss from the use of substandard coal at Rs. 15.7 billion between 1 January and 15 September. It separately calculates a Rs. 2.3 billion premium paid on emergency coal procurement, which the committee said should not be considered a financial loss in isolation.

The committee was appointed by the Sectoral Oversight Committee on 5 August and chaired by Ministry of Energy Additional Secretary K.L.R.C. Wijayasinghe, with officials from the Ministry, the Public Utilities Commission of Sri Lanka (PUCSL), National System Operator (Pvt.) Ltd. (NSO), the Lakvijaya Power Plant and Lanka Coal Company (Pvt.) Ltd. Electricity Generation Lanka (Pvt.) Ltd. (EGL) Chairman Prof. Saliya Jayasekara withdrew from the committee at his own request, citing a potential conflict of interest.

The coal in question was supplied by India’s Trident Chemphar Ltd. under a term tender to deliver 1.5 million MT to the Lakvijaya plant in Norochcholai between December 2025 and May 2026. Although 25 shipments were planned, only 19 were received due to issues of quality, the report said. The first arrived on 31 December, 2025 and the last on 3 July, 2026.

The largest component, Rs. 7.1 billion, stems from higher coal consumption. The plant burnt 0.4419 kg of Trident coal per kWh against a standard rate of 0.3742 kg/kWh drawn from 2018 to 2025 data, about 18% more coal for each unit of electricity. The committee estimated the shortfall at 461,838 MWh of energy, requiring an additional 172,820 MT of coal valued at Rs. 41.08 per kg. It assumed no factor other than the low quality of coal contributed to the higher consumption.

A further Rs. 8.6 billion was spent buying electricity from other sources to offset the plant’s reduced output between 21 January and 15 September. The plant’s generation fell by 197,673 MWh over the period, of which 35,210 MWh was covered by hydropower and the rest largely by diesel plants. This includes Rs. 402.8 million to replace 15,225 MWh lost due to the delayed arrival of the last emergency shipment.

Additional maintenance accounted for Rs. 80.4 million, an estimate covering only Unit 1, which was under maintenance at the time. Inspections in August found severe ash fouling and heavily solidified ash in the boiler’s air preheaters, which warm incoming combustion air using exhaust heat, requiring Rs. 67.5 million to dismantle, clean and reinstall the heating elements. Cleaning accumulated ash in the boiler is to cost Rs. 11.6 million and coal mill repairs Rs. 1.3 million. Costs for the remaining two units cannot be estimated until internal inspections are conducted, the report said. Extra ash and pyrite handling cost another Rs. 13.1 million.

The emergency procurement, carried out under a Cabinet decision of 26 January in case Trident failed to meet its obligations, brought in five shipments from Taranjot Resources (Pvt.) Ltd. at a fixed $ 142 per MT. Had they been bought under the term tender pricing formula, the price would have been $ 116.68 to $ 123.95 per MT, putting the additional cost at $ 7.2 million. The committee said the emergency procurement was a prudent risk mitigation measure, as sourcing the five shipments from Trident would have depleted stocks faster and risked shortages and power cuts.

The report also excludes the cost of burning coal equivalent to 270 MW to generate 220 MW due to its low calorific value. PUCSL, in a note annexed to the report, said the assessment underestimates the actual economic impact. It argued the hydropower used to fill the shortfall should be valued at the system marginal cost rather than zero, as reservoir levels were not at spilling conditions and were reported to be relatively low at times. It also said diesel generation had been costed at subsidised prices that do not reflect the actual economic cost borne by the country.

EGL, in a submission annexed to the report, also noted a 14,698 MT gap between the 1.997 million MT recorded in load port reports and the 1.982 million MT consumed, attributing it to coal left uncollected in the plant’s 42-acre coal yard.

The figure is the highest in a series of loss estimates SJB MP Marikkar has presented on the coal since early this year. In March, citing PUCSL, he told Parliament the first nine shipments had caused a loss of Rs. 8.5 billion. By May, he claimed all 17 shipments received to that point were substandard and that losses could exceed Rs. 30 billion.