Comments
Domestic coal prices are set to move up.
The board of directors of Coal India Ltd today ‘broadly agreed’ to import coal to meet the minimum fuel supply requirement (trigger level) of 80 per cent to the power plants commissioned since April 2009. The directors also agreed to pool (average) the price of such imported fuel with domestic coal.
Briefing newspersons after nearly five-hour long meeting on Tuesday, the CIL Chairman, Mr Narsing Rao, said that the board agreed to amend the terms and conditions of the fuel supply agreements (FSA), approved in April.
The amended FSAs will be instrumental to supply coal to power plants commissioned since April 2009.
As reported earlier, the board agreed to increase the penalty provisions – from the existing levels of 0.01 per cent – for supplies below the trigger level. “We will revise the penalty provisions. But today’s board meet could not come to a conclusion on the incidence of penalty. Also pending are nitty-gritty of the price pooling mechanism. The board will meet again in the first fortnight of August to decide on these two issues,” Mr Rao said.
Imports
According to the company, in the first year of supplies under the new FSAs, 15 per cent of the aggregate requirement of the power stations will be met through imports.
“This means we may have to import 18-20 million tonne of coal (over and above the promised supply of 347 mt of domestic coal to power sector) in the first year (2012-13),” Mr Rao said.
Imports will be effected through third parties such as MMTC Ltd. Import content is scheduled to come down in the subsequent years.
According to the CIL Chairman, price pooling came in-built with the decision to meet FSA requirement through imports. Otherwise, units using more of imported varieties will suffer from cost disadvantage.
Impact on state sector
The decision to pool price of imported coal with domestic coal, however, may not augur well for majority of the electricity consumers, as the units commissioned till March 2009 are enjoying 90 per cent of domestic supplies.
Available estimates suggest that such units will consume nearly 306 mt out of total projected availability of 347 mt domestic coal in this fiscal. Overall, old units – most of which are under the state sector – will consume three-fourths of the annual coal requirement (including imports) of 393 mt, in 2012-13.
Penalty provisions
While the CIL Chairman refused to give further details of discussion on the penalty issues, sources told Business Line that the company proposed five per cent penalty (on basic value of the quantity in shortfall) for supplies below the trigger and above 65 per cent in the first year.
Subsequent years should witness rise in incidence of penalty. The board, today did not take a call on the incidence of penalty.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.