Companies

Coal India hopes to break fuel pact deadlock in two weeks

Pratim Ranjan Bose Kolkata | Updated on November 16, 2017 Published on May 20, 2012

Coal India is expecting to resolve the fuel supply agreement (FSA) deadlock in next two weeks.

While 14 private and public sector units have already entered the long-term pact, the largest power producer NTPC is yet to sign an agreement.

A total of 48 thermal power units, commissioned between April 2009 and December 2011, are scheduled to enter supply pacts with the coal major in the current round.

“We are expecting to complete signing FSAs latest by the first week of June,” a senior company official told Business Line.

Though some of the private players are also yet to sign the agreement, CIL is currently more focussed on settling issues with NTPC. The public sector power major – which is reportedly enjoying 65-70 per cent of coal supplies for the respective units against existing memorandum of understandings – has raised primarily two sets of arguments on the FSAs.

On one hand, NTPC wants the recent round of FSAs to have similar penal and force majeure conditions as was in the pacts signed till March 2009.

The CIL board, while clearing the draft on April 16, diluted the penal provisions for supplies below the minimum assured 80 per cent of requirement to negligible. The coal major also imposed stricter force majeure clauses passing the buck on the buyer even for CIL's failure to procure spares and others.

“NTPC now wants us (CIL) to set varying penalty clauses for supplies less than 80 per cent. For example 50-80 per cent of supplies may attract a lower penalty when compared to supplies less than 50 per cent of requirement,” a source said.

However, any such change in FSAs may not be possible without some binding order to the board by the Government. And, there is no clarity as yet if the Government would repeat the precedence of Presidential Order.

Till that happens CIL is working on ironing out NTPC's other grievances which include demand for a more disciplined sampling procure so as to ensure the quality of coal.

“This is a fair demand from a buyer and is doable. We are hopeful to resolve such issues in a week or so,” the company source said.

On the private sector, the coal major feels that while the companies which are in need of coal and have the requisite power purchase agreements (PPAs) in place, have either initiated the process of signing FSAs or have already entered the pact.

These include Lanco, Reliance Power, CESC Ltd and Bajaj Energy. Adani Power, which requires supplies for nearly 1500-2000 MW, is yet to enter into a pact.

Published on May 20, 2012
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