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National Thermal Power Corporation(NTPC) and various state such as Maharashtra, Andhra Pradesh have made a fresh appeal to the coal ministry to immediately resolve issues relating to the fuel supply agreement (FSA) and e-auction of coal as the coal stock situation is becoming worse with each passing day. NTPC and various state utilities have claimed that despite Coal India’s (CIL) assurance that the issues will be sorted out at the earliest, no progress has been made on the issue so far.

NTPC and various state utilities have taken a firm stand that they would not sign the fuel supply agreement(FSA) if CIL does not assure 90% of the committed coal supply to power utilities. CIL wants that the trigger should be 60% and not 90% meaning if CIL and its subsidiaries were able to supply below 60% then they should be liable for the payment of penalties. The power utilities have expressed reservation in signing the agreement over fixing of the ‘trigger level’ or the level of supply below which CIL has to pay a penalty.

The power ministry has supported the stand taken by the power utilities. According to the FSA, if either of the signing entities failed to supply or offtake the agreed minimum level of coal, it faced a penalty.

Besides, the power ministry is of the view that the validity period of the FSA for new projects should be 25 years considering that the useful life of the power plant as well as period of power purchase agreement (PPA) is generally 25 years. This could be further extended based on mutual discussion before the expiry of the initial period taking into account plant condition.

Power secretary Anil Razdan, who has already sent out a communication to the coal ministry in this regard, told on 19-11-2008, “I will certainly take up the issue again with the coal ministry. I sincerenly feel the issued will be resolved soon.”

However, sources at the coal ministry and CIL have a different view altogether. Sources said the power utilities’ demand for trigger level was unjustified. Sources reiterated unless FSA was signed it would be difficult for CIL and its subsidiaries to know their coal requirement.

On e-auction of coal, power utilities are opposing the CIL’s move as they fear non-core sectors particularly cement and steel are
benefitting from it. Power utilities have argued that more coal be available to them.

Utilities say...

•Despite CIL assurance that coal shortage issue will be sorted out at the earliest, no progress has been made on the issue

• No agreement with CIL if it does not assure 90% of the committed coal supply

•Non-core sectors like cement and steel are benefitting from CIL’s move to e-auction coal...