The power ministry plans to take up project developers? concerns about the draft fuel supply agreement (FSA) with the coal ministry soon, a top government official said.
The move is aimed at breaking the prevailing logjam over the signing of the FSAs between power companies and public sector coal companies. Sources said power companies have told the ministry that the draft FSA was not acceptable to them in its present form. The message was communicated to the ministry through the Central Electricity Authority (CEA), which held a meeting with power companies on Wednesday.
?I?ll take up the matter with the coal secretary as early as possible,? power secretary P Uma Shankar told FE.
Wednesday’s meeting was called by the CEA after major power producers like NTPC raised serious objections over recent dilution of the key clauses of the draft FSA, such as those relating to penalty and force majeure conditions. Power companies also made it clear that they would not sign FSAs with CIL unless original provisions are restored.
Industry sources said power producers are miffed that provisions of the draft FSA are skewed in favour of CIL and do not inspire confidence about assured coal supply. It is because CIL has fairly diluted penalty clause in its favour.
The penalty that CIL would attract in case of short supply of coal to power producers is negligible. In case of shortfall in contracted coal supply, CIL would be liable to pay penalty at 0.01% of the simple average base price of short supply against 40% of weighted average base price earlier, sources said.
Under the new penalty system, CIL’s liability will fall down even lower than its commitment under the previous FSAs. For example, if CIL is able to supply just 3 million tonne (mt) of coal for a 1,000 mw power plant that requires annual supply of 5 mt of the fuel, it would be liable to pay only R10,000 as penalty under the new system against R47.5 crore it would have paid earlier. The penalty here is calculated on a 40% shortfall in contracted coal supply at a price of R1,000 per tonne.
As per the government decision, the trigger level for penalty is pegged at 80% of contracted coal quantity. This means CIL is bound to maintain supply to meet at least 80% of the total fuel requirement of a power project. But in the new FSA, CIL has retained the powers to unilaterally change the trigger level for payment of penalty. Besides, the coal suppliers will not be liable to pay penalty for short supply of coal in the first three years from the signing of the FSA, sources said.
CIL was directed by a presidential decree to sign FSAs by March 2012 for power projects commissioned by the end of 2011. FSAs for projects to be commissioned between January 2011 and March 2015 will be signed later.