KOLKATA: Coal India plans to take an aggressive stand against power producers and set a deadline after which it will not sign fuel supply agreements (FSAs) with the companies, as the state monopoly fights back after being arm-twisted to commit long-term fuel supply. Coal India’s board has already decided to impose negligible penalties if it defaults on FSAs and has asked companies to accept its price if CIL needs to import coal.
CIL is concerned about slow growth in output and blames delays in environmental clearances for the coal shortage. However power companies accuse the state-run firm of abusing its monopoly and offering FSAs from which it can easily back out.
Most power producers have not come forward to sign the FSAs, making Coal India officials impatient. “Depending on the final response (from power companies) we will take a decision next week. We also intend to ask for the ministry’s view on the same,” Coal India chairman S Narsing Rao told ET.
Another official said the company can’t wait forever. “We are planning to introduce a cut-off date for signing the agreements because we cannot keep on waiting indefinitely for all the firms to come and enter into contracts,” a senior Coal India official explained.
Coal India’s board agreed to sign FSAs after top industrialists jointly approached Prime Minister Manmohan Singh and sought his intervention to help power projects that had not fuel to burn. Subsequently, the company was directed to sign supply pacts.
Power companies say they are discouraged by the draft FSA prepared by Coal India. NTPC and Damodar Valley Corporation along with a number of large private sector companies are viewing the draft of the fuel supply contract as heavily biased towards the coal company.
About 50 firms are expected to sign the contracts but only about 10 has approached Coal India so far. Almost all biggies who would be consuming bulk of the additional coal have not yet approached the company.
NTPC does not intend to sign separate fuel supply agreements for new units and old units at the same power station as is now required by Coal India. It intends to sign the same set of contracts – the one it has already signed for some its units. It will be consuming almost 50% of the incremental coal that will be supplied by CIL under the new draft agreement.
“We have already written to Coal India expressing our intention because it is not practically possible to sign two sets of fuel supply agreements for different generating units of a single power station. We would like to sign the same old set of for the new units as well,” NTPC chairman Arup Roy Choudhury told ET.
Following a presidential directive, CIL has prepared a new draft of fuel supply agreement that it wants to sign for units which have come up between April 1, 2009 and December 31, 2011. This draft is different from the ones that NTPC has signed for units installed prior to April 2009.
The new draft contract has fixed the penalties in case of supply falling below 80% of the committed amount to 0.01% which will be effective after three years. While the penalties for existing agreements are 10%.