CIL agrees to 40% penalty for shortfall in supply to power
Coal India board today agreed to a hefty penalty of up to 40 percent if it fails to supply the committed quantity of the fuel to power firms, paving the way for signing new FSAs with electricity producers.
August 08, 2012 / 14:53 IST
Coal India board today agreed to a hefty penalty of up to 40 percent if it fails to supply the committed quantity of the fuel to power firms, paving the way for signing new FSAs with electricity producers.
“If CIL supplies below 50 percent (of the contracted quantity), the fine would be 40 percent,” Coal India Chairman S Narsing Rao told reporters after the board meeting.The penalty is 40 percent of the value of fuel not supplied.If the supply is between 65 and 80 percent, then the penalty is 1.5 percent, he said. For supply between 60-65 percent of the contract, CIL would attract a penalty of five percent, while the penalty is 10-20 percent for providing coal between 50-60 percent of assured quantity.There will be no penalty if Coal India supplies 80 percent or above the committed quantity of the fuel.Coal India Ltd (CIL) has already reached a consensus on supplying a minimum of 80 percent of the contracted quantity to power firms.The issue of penalty has been a bone of contention as power firms, led by NTPC, had been opposing the “meagre” penalty clause of only 0.01 percent, that too applicable after three years of shortfall in the earlier pact. They have also refused to ink to fuel supply agreement.Of the committed 80 percent of the assured supply, CIL would meet 15 percent through imports and 65 percent through domestic production. It is estimated that CIL would need to import 20 million tonnes of coal this year to meet the demand of power companies.“We have resolved to revise the FSA. The 80 percent trigger remains. Initially State Trading Corporation and MMTC will do (the import),” Rao said.He added that CIL would also start importing coal on a small scale so that it is not “totally dependent on others over a period.”To offset the impact of high import costs, Planning Commission Deputy Chairman Montek Singh Ahluwalia had said CIL should adopt a pooling formula on prices by combining rates
of imported and domestic coal.Rao said the board in principle approved pooling of prices. “A mechanism of pooling of prices is simple but this is incumbent upon that all domestic coal consumers are willing to pay some additional price in order to fund or support the import price,” he added.He further said basic decision of board is over, while the rest is operational details which the Central Electricity Authority will work out.So far, only 29 power companies, including Lanco, Reliance Power (Rosa plant) and Adani have signed FSAs with the state-run coal giant. The government had in April issued a directive to CIL to commit a minimum 80 percent of fuel supply to power producers, failing which it would attract penalty.PTI Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
