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Jun 14, 2012, 05.29 PM IST | Source: PTI

PMO to hold meeting on June 22 to resolve issues on FSAs

The Prime Minister's Office would convene a meeting next week to iron out issues, mainly the penalty clause deterring power firms such as NTPC from inking fuel supply pacts with Coal India.

The Prime Minister's Office (PMO) would convene a meeting next week to iron out issues, mainly the penalty clause deterring power firms such as NTPC from inking fuel supply pacts with Coal India .

"The PMO has called a meeting on June 22 to discuss issues like penalty clause in model fuel supply agreements (FSAs). It will also deliberate on pooling of coal prices, besides other issues," a top official in the Coal Ministry told PTI.

The meeting to be chaired by Prime Minister's Principal Secretary Pulok Chatterji, is likely to be attended by senior Coal and Power Ministry officials, besides the chairman and managing director of CIL, S Narsing Rao.

The minimum penalty clause in the FSA is a bone of contention between Coal and Power ministries, as the power companies are opposed to penalty clause which states that CIL is not liable to pay penalty for the first three years of the
pact even if there is supply shortfall.

Coal India, under obligation to ensure a minimum 80% of the committed supply to power firms as per a Presidential directive issued in April, has so far signed FSAs with 15 of the total about 50 power plants.

Others, including power major NTPC, have not entered into pact as CIL has suggested a 0.01% penalty on not delivering the fuel in time, but the penalty would only be applicable after three years of signing the pact, which as per sources, is opposed by the power firms. Besides as per the new FSA, CIL will have the right to decide on the penalty, in case of disagreement.

The PMO, the official said, would also discuss pooling of coal prices by combining domestic and imported prices. Last week, Planning Commission Deputy Chairman Montek Singh Ahluwalia had suggested that CIL should adopt a pooling formula on prices by combining the prices of imported and domestic coal to offset the impact of high import costs.

Since January, Coal India (CIL) has been supplying the raw material through a new pricing formula, which is based on gross calorific value (GCV) of the thermal coal. However, after heavy criticism from the industry, it was forced to delink the rates from international parity prices in the GCV-based pricing to minimise the impact of increase in price.
    
The Coal major, which accounts for about 80% of the domestic production, has set a target of 464 million tonnes for the current fiscal, out of which about 347 MT is to be supplied to power firms.

Besides this, the official said the PMO would also discuss the recommendations of T L Shankar Committee like setting up a coal regulatory authority and change of pricing mechanism of coal.

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