PM has resolved a longstanding issue: Power Producers Asso

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PM has resolved a longstanding issue: Power Producers Asso

Today, the government announced that Coal India will sign fuel supply agreements with private power companies by March 31. Ashok Kumar Khurana - the director general of Association of Power Producers says, the Prime Minister has resolved a longstanding issue.

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Today, the government announced that Coal India will sign fuel supply agreements with private power companies by March 31.

In an interview to CNBC-TV18, Ashok Kumar Khurana - the director general of Association of Power Producers says, the Prime Minister has resolved a longstanding issue.

Below is the edited transcript of his interview on CNBC-TV18. Also watch the accompanying video.

Q: We have got some news from the Prime Minister's Office saying that Coal India will now resume signing fuel supply agreements and that it will guarantee supply of 80% of the fuel requirements. Have I got that right? Is that what was agreed? Will that be available to all power plants even those which have signed agreements, maybe abroad or have other arrangements, but would want that agreement with Coal India?

A: APP would like to thank the Prime Minster for resolving a longstanding concern. Since 2009 not a single FSA was filed, except for one or two. We had about 25,000 megawatt of power without the FSA. Now with coming of this initiative of the Prime Minister, this long standing issue has been resolved. All power projects commissioned after March 2009 will get adequate coal to fire their turbines and supply power. This will save them from becoming NPLs.

Q: For instance, Mundra Power Plant had an agreement back to back with the Indonesian government or with an Indonesian coal company. Now even over there, will Coal India be able to sign a fuel supply agreement?

A: No, these are the projects based on domestic coal linkage. They are the specific projects where the Coal India has issued the letter of assurances and were not signing FSA to the adequate quantity. In fact they were insisting on signing only upto 50% and for five years. Now, both these things make the project unviable.

With new initiative now, they will sign upto the full quantity required with trigger at 80% and incentives go beyond 90% and for the period of 20 years. This change has made coal sector compatible with the power sector regulations.

Q: Who are the initial beneficiaries? Which are the ones that have this letter of assurance, but could not force CIL to sign the FSA?

A: There were about 25,000 megawatts. I can name Rosa,, Anpara C, CLP Jhajjar, Bakreswar, Kota, TPP of NTPC, Uttaran, Kutch Lignite, Vijayawada, Chandrapur, Bhilai. It's totaling about 25,000 megawatt of power, commissioned post March 2009, which had not signed the FSA.

Q: I understand that if Coal India is not able to supply from its own mines, it will guarantee importing them for these entities.

A: Yes, that is what the press release clearly mentions. That is mandated under the NCDP also. It clearly specifies that incase of deficit of domestic coal, Coal India would import and make good the deficit.

Q: What will be the penalty, if Coal India does not?

A: Those modalities will be worked out. It is I think 10%, that formula they are working. We are not concerned with penalty. This helps to restore the confidence back in investors and the bankers that the government now means business.

Q: What would it mean to Coal India investor, if that company had to pay up a penalty? You are saying it will be something like around 10%, if they renege on their commitments.

A: There is a formula by which they calculate the LDs over there and then they pay it. But the very fact that penalties are there, they will ensure that coal is made available.