Row over CIL fuel supply to power sector may end

BL quoted Mr PS Bhattacharya chairman of coal India Limited as saying that the row over the proposed fuel supply agreement between Coal India Ltd and the power sector of the country led by NTPC may finally be resolved.

Mr Bhattacharya said that in a recent meeting with Coal India, Mr Jairam Ramesh the Union Power Minister had agreed to set actual supply quantity by CIL to existing power plants as the benchmark for the fuel signing agreement.

According to Mr Bhattacharya, the Power Minister agreed to CIL’s proposal to set the trigger or the minimum guaranteed supply or off-take quantities at 90% of the actual supplies made in 2007-08. Violation of the minimum guaranteed supply or off-take level will attract penalties on either the producer or the consumer.

The Power Ministry said that the tenure of the agreement may be reduced from the originally proposed 20 years to a 5 year period.

Mr Bhattacharya said that in a recent communication, the Union Power Ministry added that the State power utilities, including NTPC, enter into the FSA with CIL on the following lines, adding that the coal major has approached NTPC with a draft agreement incorporating the changes as suggested by Mr Ramesh.

However, NTPC has approximately 24,000 MW thermal power capacity and procures over 100 million tonne of raw and beneficiated coal from CIL. Overall the company contributes approximately 37% of CIL’s total sales of thermal coal to power utilities.
According to the New Coal Distribution Policy, CIL was supposed to replace the linkages by firm supply agreements with all buyers by June 30th 2008. It initially proposed to set the trigger for the existing power plants at 60% of the targeted supplies as set out in the Annual Action Plan for the respective year.

However, the proposal was opposed by power utilities. NTPC, being the single largest consumer had asked CIL to set the trigger at 90 per cent level for existing power plants. The coal major, however, contested the power sector’s demand.

The row has forced CIL to extend the deadline repeatedly and till date the company could enter into only 5 such agreements with State utilities of Karnataka, Gujarat and Andhra Pradesh.

Mr Bhattacharya said that “If the power sector now agrees to the Power Ministry’s formula to set the benchmark quantity at the 2007-08 level, we can comfortably set the trigger at 90%.”

(Sourced from Business Line)