‘CIL must not favour PSU power cos’
This amounts to a major policy change as Scindia’s predecessor in the power ministry Sushilkumar Shinde had favoured special dispensation for PSUs in the FSAs.
Coal India is in the process of finalising a model FSA with power companies to assure them long-term coal supplies for projects coming up by March 2015. The FSA binds both buyer and seller to coal supplies.
Scindia said the proposals in the model FSA were not acceptable to private power developers as they feel different models for a single sector would lead to distortions. Despite objection from power developers, CIL in its modified model FSA uploaded on its website in September had retained the same clauses.
The FSA has other discriminatory provisions as well: Private firms will be required to deposit 6% of the base price of coal as security before signing the FSA while PSUs will comply with security condition only after signing the agreement. In this case the commitment provided by the PSUs prior to the issue of LoA shall be converted into security deposit.
The power ministry is concerned about the terms contained in the model FSA as it has the potential to further slow down investment in the power sector and derail capacity addition. In 11th Plan, against a target of 62,000 MW of new capacity, only about 55,000 MW was added.
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