CIL board clears new fuel supply pact with riders

The Coal India (CIL) board on Friday cleared the new model fuel supply agreement (FSA), specifying some conditions. After an eight-hour board meeting, CIL chairman S Narsing Rao told reporters that as of now, the board has cleared the new FSA in terms of supplying imported coal to consumers on a cost-plus basis. This will continue as long as there is no business model for price pooling of coal. ?The CIL management has been advised to work out a business model for price pooling. This could replace the terms agreed as of now,? Rao said. However, the board has not decided on a time frame for developing this business model.

CIL has agreed to a trigger level of 80%, 15% of which will be met through supplies of imported coal. Import orders will be placed only if consumers demand it.

Rao said if a discount has to be offered for imported coal in a price pooling mechanism, the discount amount has to be passed on to the domestic coal. Although he did not want to say how much discount CIL could offer on imported coal, he said the board was deliberating on the issue.

The business plan, he said, would deal with issues like impact on taxes in case of imports, impact of offering coal in landed price vis-a-vis discount price, whose name should an invoice bear and others.

CIL has proposed to import coal through a third-party agency like MSTC or MMTC. So, in whose name the invoice should be made needs to be sorted out, Rao said, adding after the business model was framed, CIL would go back to the board for clearance.

On penalty clause, he said the board has agreed to a penalty between 10% and 40%.

Meanwhile, CIL?s independent director SK Barua has written to board members saying the parties named in the scam related to allotment of coal blocks should not be brought under the FSA, since the linkage given to the parties would benefit them twice.

He said since the companies were already sitting on coal blocks, providing it linkage and bringing under FSA would lead to another scam. The Tatas, Reliance and NTPC have already been named in the scam.

Although Barua left the meeting before it was over, he didn?t want to comment on the issue. Rao said the board only discussed those issues, which were in its agenda but didn?t clarify whether the board has taken the issue into cognizance.

A CIL official said companies allotted coal blocks were given tapering linkages, which meant that agreed amount of coal supplies would lessen in commensuration with the development of block and supplies from it.