CIL tweaks compensation, incentive terms under fuel supply agreements

Apr 02 2014, 04:49 IST
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SummaryState-owned Coal India (CIL) has changed the basis of calculating compensation and incentive under fuel supply agreements

State-owned Coal India (CIL) has changed the basis of calculating compensation and incentive under fuel supply agreements for non-power consumers such as cement, iron and steel, shifting it from the current system of calculation based on the basic price of highest grade of coal to weighted average base price of different grades supplied.

In a letter to its subsidiaries, CIL said that the modification has been approved by the competent authority and will be effective from April 1. The changes are expected to reduce financial burden for CIL as average for pricing of coal is expected to be lower than the base price of the highest grade of coal supplied.

But the new mechanism would only be for non-core customers who account for close to 20% of CIL's total supplies. CIL has signed 157 FSAs so far for a capacity of 71,145 MW. The coal PSU is yet to enter into fuel supply pacts with 15 power units as certain issues related to them, such as change in ownership and extension of supplies, are being considered separately.

The Cabinet Committee on Investment (CCI) had earlier stated that the timelines for signing of fuel supply pacts for power projects of 78,000 MW capacity should be met.

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