Sri Lanka’s energy sector is grappling with the fallout of substandard coal imports, as confirmed by the National Audit Department and acknowledged by Anura Kumara Dissanayake in Parliament.
The President emphasized that the core issue lies not in the tender process but in suppliers failing to meet required coal quality standards. However, the audit paints a broader picture one of systemic weaknesses spanning procurement, oversight, and verification processes.
At the center of the crisis is the Lakvijaya Power Plant, a facility responsible for 30–40% of Sri Lanka’s electricity generation. The plant requires approximately 2.25 million metric tons of coal annually, making consistent quality essential for stable output.
Instead, poor-quality coal has led to reduced generation capacity. While the plant is designed to produce around 900 MW, actual output has fallen to roughly 810 MW after internal consumption. Daily fluctuations further highlight the instability, with some units producing significantly below expected levels.
This shortfall has forced authorities to turn to alternative power sources, including diesel generation, significantly increasing operational costs. The President warned that while these costs will be recovered from suppliers where possible, the broader financial burden could reach Rs. 32 billion over a three-month period.
The audit’s estimated Rs. 2.24 billion loss reflects direct inefficiencies from increased coal consumption. However, the wider economic impact including reliance on costlier energy sources has pushed total coal-related losses to around Rs. 7 billion.
To mitigate the crisis, the Government has withheld payments and imposed steep penalties on suppliers. In one instance, the price of coal was reduced from $98 per tonne to $34 under penalty provisions. Legal action remains on the table for non-compliant companies.
Despite these measures, the situation underscores deeper structural issues. Recurring audit findings from 2016 and 2022 had already warned of weaknesses in procurement and quality control—warnings that appear to have gone largely unaddressed.
As Sri Lanka navigates ongoing energy challenges, the coal procurement crisis serves as a stark reminder: without strict oversight and accountability, failures in supply chains can quickly escalate into national-level economic and energy disruptions.
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