KOLKATA: India’s largest power sector company NTPC’s denial to sign the newly formulated fuel supply agreement (FSA) for new power plants is likely to jeopardise the government mandated plan to secure committed coal supply to power producers.
NTPC accounts for more than 35% of the quantity that CIL would have to supply under the new FSA. Of the 51 FSAs which six CIL subsidiaries (out of nine) would have to sign to supply an additional 70 million tonne to the new power plants to feed 28,000 MW of new generation, supplies to NTPC only would be 25mt to its capacity addition during 2009-12.
But NTPC chairman Arup Roychowdhury made clear that his company would not sign the new FSA since there was nothing of supply guarantee in it. Although CIL’s new chairman S Narsing Rao said his company is in talks with NTPC to resolve issue, the matter have become aggravated with NTPC now also denying to pay for coal on Gross Calorific Value (GCV) based pricing. NTPC wants CIL to go back to the old regime of useful heat value (UHV) based pricing.
Roychowdhury said the company’s requirement was not matching with the grades, which CIL has created under the GCV classification. “The way CIL has created the new GCV grades are not beyond doubts. NTPC cannot pay for coal which didn’t have quality assurance,” he said. The matter has already been referred to the power ministry to take it up with the coal ministry an official said.
Damodar Valley Corporation chairman RN Sen said though DVC would sign the FSA, it would join hands with NTPC in protesting against the quality determination mechanism as well as the new FSA norms. He said the entire scheme of supplies were one sided protecting only CIL’s interest. ” Although there is a provision of joint sampling by the supplier and consumer, suppliers are bound to take what ever CIL supplies since power companies are coal starved,” Sen said.
Rao agreed that CIL and its subsidiaries didn’t have enough bomb calorimeters to make the GCV based grading, though he did not make clear whether CIL would go back to the old practice of pricing coal based on UHV.
CIL’s main intend for shifting to GCV regime was to bring coal at international parity pricing and gradually phase out discount in pricing coal. Coal at UHV -based pricing was sold at a 50% discount compared to international prices. The shift to GCV brought Indian coal prices closer to the international prices. So if CIL has to bow down to NTPC’s demand, the Planning Commission’s idea of removing subsidy for pricing energy and power would get a great blow.
A section of CIL officials felt the issue of going back to UHV-based pricing to GCV -based pricing wouldn’t have come up, if the FSA norms were realistic.
While CIL agreed to the presidential decree of supplying a normative quantity to the new power projects at a 80% trigger level along with a penalty clause, the penalty, which was left on it to decide was fixed at 0.01% of the value of quantity short supplied and that too after a period of three years, when CIL hopes to attain a production target of 520 million tonne.
When CIL first introduced FSA in 2007 replacing linkage, it agreed to a trigger level of 90% and penalty of 10% if it failed to supply 90% of the agreed quantity. But Zohra Chatterji, additional secretary, ministry of coal after the board meeting, which decided on the new FSA formula, said CIL formulated the new FSA only to carry out the presidential decree.
In fact, CIL was reluctant to supply any coal to the new power projects and wanted the government to speak for running the new utilities with imported coal. But with industrial tycoons like Ratan Tata and Anil Ambani making hectic lobbying with the government to get Indian coal, the government issued a presidential decree forcing CIL to enter into a new FSAs with new power projects.
Rao felt maintaining an 80% trigger level would be critical. But if power plants disagreed to the penalty clause, CIL would see if it had a scope to disagree with the trigger level, an official added.
Till Wednesday ten FSAs have been signed of which Rajasthan Rajya Vidyut Utpadan Nigam Ltd has signed for its power plants at Kora, Suratgarh and Chhabra. DVC, the three way venture of Union ,West Bengaland Jharkhand have signed the FSA for its 2×500 mw units at Mejia, while Bajaj Power Generation Private Ltd, in the private sector, has also entered into the agreement. But players like Tata Power and Reliance who lobbied for the new FSA were yet to sign, a CIL official said.
MENU 