NEW DELHI/KOLKATA: Coal India has inserted a new clause in Fuel Supply Agreements (FSAs) which says that if the state-run firm needs to import coal to meet its obligations, customers will have to accept the price it charges or surrender their right to be supplied the contracted quantity, further diluting its responsibility to provide fuel to power plants despite the Presidential Directive.
“This is abuse of monopoly,” Ashok Khurana, director general of Association of Power Producers, said.
“After prima facie examination of the FSAs, it looks the model documents are loaded in favour of CIL, hedging them from all eventualities and responsibility for any shortfall,” he added.
Coal India has also shielded itself from penalties if its production suffers due to environment, pollution or forest clearances. Coal India officials said the FSAs had been designed in view of uncertainties about market conditions.
“With a lot of uncertainty in the demand supply scenario as well as the international coal market the conditions in the FSA have been made reasonably stringent to make sure the possibility of paying penalty is minimal,” said a senior Coal India official.
The company has made sure it does not need to pay any penalty in case its equipment and machineries break-down or if its contractors fail to supply equipment and machineries or there are delays on the part of the vendors in supplying spare parts.
Shortage in power supply and non-supply of explosives by vendors will further make Coal India eligible for non-payment of penalties in case it fails to supply 80% of coal under the fuel supply agreements.
During 2011-12, Coal India suffered sluggish growth in production due to floods at a large number of its mines.
The force majeure clause also protects the company from such natural events.
The Fuel Supply Agreement document also says that the assured coal supply quantity will be proportionate to the percentage of generation covered under power purchase agreements signed by power companies with power utilities.
The agreement mentions that imported coal will be delivered at the Ports at a cost plus pricing basis and it will be on the power company to carry it to their plants.
“We want coal to be delivered to our plants and not just the port of delivery. In case CIL insists we may opt out. However, we are not bothered by the token penalty because we want coal from them to run our plants,” Arup Roy Choudhury, chairman, NTPC told ET.
However, if a power producer opts out of imports his annual contracted quantity will be reduced to the extent CIL was planning to supply imported coal to the power generator.