Third-party validation of coal may become must for FSAs
Accused of supplying sub-standard coal at high prices, the country’s largest coal producer, Coal India (CIL), is planning to make third-party inspection of coal samples mandatory for all future fuel supply agreements (FSAs) with the user industries in the power, steel and cement sectors.
Sources privy to the development told FE that the move would restrain companies from levelling accusations against the coal PSU as the tests on coal samples would be undertaken by an independent agency whose selection would be mutually decided by CIL and the user companies.
CIL and the user companies would be free to select an agency either from the domestic market or abroad. However, the consumers would have to bear the cost of such sample testing and its results would have to be accepted by both the parties. The pricing of coal would be on the basis of the calorific value of coal determined through such testing, a CIL official said.
The changes follow allegations of “abuse of dominance” levelled against CIL by Maharashtra State Power Generation Company and the Association of Power Producers, among others, before the Competition Commission of India (CCI).
It is understood that the Director General of Investigation (DGI) of CCI has found evidence of “abuse of dominance” by the CIL over allegations of supply of low quality coal at higher prices and non-transparent contract conditions on quality and other supply parameters.
When contacted, S Narsing Rao, chairman and managing director of CIL, said: “We are now planning to get the
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