May enter fuel supply agreement in January

Power major NTPC decided to enter into fuel supply agreement (FSA) with Coal India within a month. This is irrespective of any major breakthrough in the company’s demand for changes in FSA terms, according to sources.

The company previously held on to its demand to enter supply pacts in pre-March 2009 terms, for capacities added as brownfield expansion in the last three and a half years. CIL, however, clarified that according to its board decision, the new agreement was applicable for all power stations commissioned after March 2009.

“We can sign FSAs probably with in a month,” NTPC Chairman Arup Roy Choudhury told newspersons after a meeting with the CIL top brass, at a city hotel, this afternoon.

According to Choudhury, a number of issues were discussed and clarified. And, both the companies would seek board approvals this month based on today’s discussions.

When contacted CIL Chairman S. Narsing Rao, expressed hope in ending the impasse. “I am hopeful that NTPC will soon enter the FSA,” he said.

While Rao was tight-lipped, sources told Business Line that the coal major has declined to do away with the “road-cum-rail” despatch mode. This requires consumers — not connected by merry-go-round (MGR) rail-network — to lift five per cent of the committed volume, by road.

The clause is incorporated in the new supply agreement to ensure that CIL’s business interests do not suffer in case of any logjam in rail transport.

CIL sources feel that the clause hardly impacts NTPC, as most of its power stations are connected by merry-go-round rail network.

The coal major, however, agreed to NTPC’s demand on various quality issues. For example, the upper limit for reimbursement for supplying ‘stones’ (mixed with coal) may be removed from the proposed 0.75 per cent of the value, a CIL official said.

The company is likely to approach its board to amend the draft agreement accordingly.

Relief for private sector

Meanwhile, CIL is also considering amendments in supply agreement terms to offer more elbow room to private power producers in the case of any dispute arising out of changes in government policies.

“The existing draft underlines that FSAs should also undergo due modification in case of a policy change. However, there are differences in the dispute settlement mechanism. While PSUs are allowed to approach the Coal Ministry, the private sector consumers were not granted with any such opportunity,” a source said.

The company may now propose its board to allow private sector opportunity to approach the Coal Ministry in case of such disputes.

(This article was published on December 10, 2012)
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