State-run power generator NTPC has decided to end a one-and-a-half year long payment dispute with national miner Coal India.
According to CIL records, NTPC withheld ₹3,035-crore payments against coal supplies made during October 2012 to September 2013, citing poor quality of the fuel. The power company felt the supplies were notches below the promised quality.
Majority of the dues are payable to CIL subsidiaries — Eastern Coalfields and Mahanadi Coalfields.
Following the introduction of third party sampling and strict enforcement of “cash-and-carry” mechanism by CIL in October 2013, NTPC cleared dues since then, but no decision could be arrived at on the old dues.
According to people aware of the development, in a meeting held on March 6, the two state-owned companies decided to settle the remaining dues based on sampling results at every mine’s end for the last three months.
The reconciliation exercise is expected to be over this fiscal.
Revenue loss The settlement mechanism is likely to leave a negative impact on the CIL balance sheet.
Sources told Business Line that third party sampling recorded grade slippage in nearly 7.5 per cent of the total CIL supplies to NTPC during October-December 2013. It is anticipated that grade slippage is higher at Eastern Coalfields. Also, wider the mismatch between the actual and the promised quality, lower the payment CIL will get from buyers. Sources say the miner may have to settle the dues with NTPC for around ₹500 crore, much lower than the original claim of ₹3,035 crore.
The indication is that while the recovery of past dues from NTPC will bring down the finance cost of CIL, the coal miner may have to absorb a bigger hit on profit which is already under pressure.
Consumer redress Meanwhile, to avoid future disputes, CIL requested NTPC to suggest measures to improve the efficiency of third party sampling at the mine end.
NTPC procures nearly 141 million tonnes of coal from CIL annually at a total cost of around ₹32,000 crore.
“We want NTPC to help us supply the assured quality of coal. The sampling will be done at the mine end. But the consumer is free to suggest and take every measure to make it error-free,” a CIL official said.