The Hindu Business Line : Coal India misses deadline for fuel supply pacts

Kolkata. Sept. 30 Differences on the guaranteed offtake or supply level (described as trigger) have once again come in Coal India’s way to enter into fuel supply agreements (FSA) with power utilities across the country within the scheduled timeline.

According to sources, the coal major has approached the Union Coal Ministry seeking further extension of deadline for entering FSAs with power sector from September 30 to November 30.

The country has about 75 coal-based thermal power stations generating 66,000 MW, out of which 72 (64,000 MW) are catered by CIL. Since coal is supplied to these stations from multiple subsidiaries, the company requires signing about 100 FSAs.

However, till Monday, CIL could enter into only five FSAs for supply to power utilities of three States - Karnataka, Gujarat and Andhra Pradesh. NTPC, the single largest power producer procuring one third of CIL’s total supplies to power sector, has so far denied accepting the current trigger level.

NTPC is slated to procure 108 million tonnes of thermal coal from CIL in 2008-09 out of the company’s total projected supply of 292 million tonnes to power sector during this fiscal.

According to the New Coal Distribution Policy (NCDP) CIL was slated to enter into firm supply pacts, replacing the existing linkage system for coal supplies, with its consumers latest by June 30, 2008.

Trigger level

While the company could complete the procedure with all other consumers within the deadline, power sector consuming 75 per cent of the total production wanted CIL to raise the trigger level to 80 per cent of the contracted volume from the existing 60 per cent (for the existing customers).

Since violation of guaranteed supply or off take agreement would invite penalty clauses under the New Coal Distribution Policy, by raising the trigger level the power sector wanted to increase CIL to increase the supply assurance.

Power sector’s insistence has brought discomfort in CIL, as raising the trigger level to 80 per cent for 75 per cent of its total supplies will necessarily require drastic improvement in the company’s production planning and management efficiency.