CIL likely to consider FSA with power companies on July 10

The state-run Coal India Limited (CIL) is expected to take up the issue of Fuel Supply Pacts (FSAs) to be signed with power firms on July 10 with the Prime Minister's Office intervening in the deadlock between the two sides.

The PMO's intervention came as CIL and power companies, including state-owned NTPC, are at loggerheads over certain clauses in the FSAs which were to be completed months back and has been adversely affecting the power generation due to low coal supplies.

The Prime Minister's Principal Secretary Pulok Chatterjee today held a meeting with Secretaries of Coal and Power to take stock of the situation and address the differences, particularly relating to the quantum of assured supplies of coal to the power companies. CIL Chairman S Narsing Rao was also present, sources said.

As per the original understanding, CIL was to supply at least 80% of the committed quantity of the requirements of the power firms. The CIL was not comfortable with this, citing reasons like production constraints, and
wanted it to be reduced.

The meeting today is believed to have reached an understanding that CIL could supply between 65 and 80% of the requirement of power companies, for which FSAs would be signed.

This matter is now expected to be taken up by the CIL Board meeting on July 10, sources said. NTPC and many power companies have refused to ink fuel supply agreements (FSAs) with CIL, disagreeing with the introduction of new clauses in the pact.

So far, only 27 power plants including that of Lanco, Reliance and Adani, of 48 in all, have signed FSAs with the state-run coal giant. Sources said the CIL has been asked to look into the possibility of supplying 75-80% of the assured quantity in the second year with the relaxed penalty clause while "in the third, fourth and fifth year, it could be 80% with strict penalty".

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

The government had in April issued a directive to CIL to commit itself to a minimum 80% of fuel supply to power producers, failing which it would attract penalty.

The PMO last month, in a bid to resolve the row, had asked CIL to sign the pacts with power producers with assured minimum coal supply of 65% of the commitment.

Coal Minister Sriprakash Jaiswal, earlier this week said that with PMO's intervention he was hopeful of a solution in the issue.

Meanwhile, sources said, the meeting decided that Coal India will take a final call on adopting a pooling formula on prices by combining the prices of imported and domestic coal to offset the impact of high import costs."Pooling of coal price mechanism would be decided by CIL," a source said.

It was also decided that the Central Electricity Authority will decide the "quantum of imported coal to be allocated to thermal power plants."