Two days after Coal India Ltd (CIL), the world’s largest coal producer, entered into fuel supply agreements (FSAs) with 27 power companies, some power producers, including Maharashtra State Power Generation Co Ltd (Mahagenco), on Wednesday raised objections against some terms of the pacts.
Mahagenco, one of the largest power producers in the country, has sent a communication to CIL, demanding some provisions in the FSA, mainly the penalty clause, be revisited. The company further said the draft FSA, in its present format, took care of only CIL’s interests.
“FSA in the present format is simply unacceptable for us, and, therefore, we have sent a letter to Coal India, seeking a couple of amendments in the agreement,” Subrat Ratho, managing director of Mahagenco, told Business Standard.
Many power companies, including state-run NTPC Ltd and Mahagenco, did not sign FSA on Monday, citing the contentious issues. Mahagenco, however, said it would sign the agreement with CIL to ensure the availability of coal, but still raise its opposition to the contentious clauses.
The Prime Minister’s Office has convened a meeting of coal and power ministry officials and representatives of CIL on Friday to iron out the differences in the pacts.
Power producers said if FSA was revised in favour of them after the government's intervention, then CIL should pass on the benefits to the companies.
The government had issued a presidential directive to CIL in April to sign FSAs with the power producers, assuring them of at least 80% of the committed coal delivery. According to the Association of Power Producers (APP), which represents more than 20 private power companies in the country, the FSA provides CIL the option of unilaterally calling for a review after five years and the sole power to terminate the agreement in case the review fails to bring the parties to a mutually agreeable ground. The provision relating to a penalty of only 0.01 per cent on CIL and associated companies for failure of supplying 80 per cent of their commitment “is not going to benefit power producers” Mahagenco’s Ratho said.
Ashok Khurana, director general of APP, shares Ratho’s views and said the penalty level of 0.01 per cent was “ridiculously low”.