Power major expects board approval for payment of dues on June 30

The six-month long stand-off between Coal India and power major NTPC on non-payment of dues against coal purchases may be settled early next month.

At a Chairman-level meeting in Kolkata on Wednesday, NTPC promised to pay the dues to the ailing Eastern Coalfields Ltd, a wholly owned subsidiary of CIL, subject to board approval on July 30. CIL has also requested the power major to make some ad-hoc payments (before board approval) to help ECL mitigate cash shortfall.

According to sources in CIL, based on third party sampling results drawn by Dhanbad-based Central Institute of Mining and Fuel Research (CIMFR), NTPC will pay nearly Rs 800 crore of dues as against ECL’s original claim of approximately Rs 1,200 crore.

NTPC Chairman Arup Roy Chowdhury confirmed that he was looking forward to board approval to pay CIL the coal dues. However, he did not comment on the settlement formula and the amount to be paid.

Background

The controversy was kicked off early this year when NTPC started paying ECL at the rate of lowest rank coal (G-17) for nearly 14.5 million tonne supplies from Rajmahal mines. The decision, NTPC claimed, was based on sampling results at the plant-end.

According to ECL, Rajmahal mines — developed to cater NTPC facilities at Farakka (2100 MW in West Bengal and Kahalgaon (1340 MW) in Bihar — produces thermal coal of G-10 to G-13 grades.

The power major also adopted a similar strategy for purchase smaller quantity of high value Ranigunj coal from ECL.

With dues piling up, ECL first stopped supplies to NTPC Farakka and Kahalgaon in April, leading to threats of a black out in Bihar, parts of West Bengal and North East.

Under pressure from the Union Government, the coal company later resumed supplies, but only partially. While the stand-off proved costly for both sides, ECL was particularly affected due to huge cash shortfall.

Following an inter-ministerial meetings in April, CIMFR, was invited to sample the fresh supplies. CIL agreed to settle past dues on the basis of current sampling results.

Settlement formula

According to CIL, the third party sampling results found that in 60 per cent of despatches, the coal quality fell short by one grade. In nearly 30 per cent cases, ECL supplied the promised grades. Wider variance on quality (on either side) was noticed in 10 per cent of supplies.

“The results vindicate our stand that there was no such wide variance in quality of supplies, as was claimed by NTPC,” a senior CIL official said.

According to ECL sources, NTPC will settle the past bills for Rajmahal coal according to the formula prescribed by CIMFR. However, for low-ash Ranigunj coal the power major should pay the entire bill as claimed by ECL.

(This article was published on July 18, 2013)
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