KOLKATA | DELHI: Power producers, including the country’s largest player NTPC, have refused to sign the new fuel supply agreement with Coal India, saying the proposed contract is biased and absolves the state-run company of all obligations. The companies have accused Coal India of frittering away the opportunity provided by the presidential directive by drafting a lopsided agreement.
“We will not sign the new fuel supply agreement in the present form because it does not provide much in terms of coal supply commitment,” NTPC chairman and managing director Arup Roy Choudhury told ET.
The new pact stipulates that if Coal India fails to meet its coal supply commitment, it will pay a penalty of just 0.01% of the value of the shortfall. The proposed contract also gives discretion to the supplier to terminate an agreement unilaterally. Power producers say this clause creates uncertainty over the tenure of the agreement.
Clauses empowering Coal India to decide the cost of imported coal and absolving it of supply obligations in case of power outages or equipment breakdown have also not gone down well with the utilities. Besides NTPC, power producers including Damodar Valley Corporation and even private companies are protesting the new model. “The agreement that we are being asked to sign puts minimal onus on the coal supplier for non-adherence to supply commitments,” DVC chairman and managing director R N Sen said.
The Association of Power Producers, which represents 24 companies in the sector, said the new fuel supply agreement is heavily loaded against power developers. “The net result of this FSA is that it absolves CIL of its commitments and returns to business as usual that is supply on best effort basis,” said Ashok Khurana, director general of the association. A senior executive at Jindal India Thermal said the “miniscule” penalty fixed by CIL is an “eyewash”.
“Power companies are finding it difficult to sign power purchase agreements with states as required in the FSA,” the executive said. “PPA signing takes a year while this condition has been included in the FSAs just two months back.”
While power secretary P Uma Shankar refused comment, a senior official in the ministry said they are analyzing the new contract and may take it up with the coal ministry.
“At first look, the document definitely looks biased in favour of CIL,” the official said. “We are exploring various options.”
According to initial estimates, Coal India will have to supply about 50 million tonne of coal under the new fuel supply agreements. Of this, about 25 million tonne will go to NTPC for its new generation capacities.