Private power producers have accused Coal India of drafting a ‘one-sided’ fuel supply agreements (FSAs) favouring Government companies.

According to private power producers, the FSA is discriminatory and has set differential treatment that favours Government utilities on many aspects.

However, the nodal Power Ministry is not aware of discriminations, while Coal India has turned down any discrimination claims. “Our approach is common for all. We are not aware of different norms for Government and private companies,” said Power Secretary P. Uma Shankar.

The clauses where Coal India has made separate norms for private and Government companies include right to terminate FSA, security deposit, suspension of coal supplies and settlement of disputes.

“The discrimination in the FSAs between Government-owned generating stations and private producers has no precedents and it is noteworthy that before 2009, FSA for public and private sector generating stations were the same,” said Ashok Khurana, Director-General of Association of Power Producers (APP). APP is the lobby body for private power companies.

The Power Secretary said that there are issues related to quality of coal, pricing of imported coal and blending it with domestic supplies.

“We have taken up issues with Coal Ministry with regards to FSA. Some of the issues have been addressed. But we are not looking at it separately for private or Government companies,” he added.

According to APP, the model FSA did not meet the ‘intent of the Presidential Decree.’

“There are no substantial variations. In one or two cases, such as security deposits, there are some changes from a private company and a Government company,” Coal India Chairman and Managing Director S. Narsing Rao told Business Line.

A senior Coal Ministry official said that the differences are in order to mitigate risks by Coal India. The official questioned what if a private power producer did not renew the power purchase agreement with Discom and start selling as merchant power, how will Coal India protect its interest?

“There are ways to deal with Government companies in case of defaults. But, Coal India needs to protect its interest while conducting business with private players,” the Coal Ministry official added.

However, the earlier FSAs signed till 2009 did not have different norms for Government and private companies.

“In 2009 FSAs, there were hardly one or two private players. All power producers were Government-owned who sales electricity to State distribution utilities,” said the Coal Ministry official.

(This article was published on November 6, 2012)
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