CIL board approves signing FSA with power cos without PPAs

Coal India board has approved signing of FSA with power producers even in the absence of long-term purchase pacts between generation companies and distribution firms, but fuel supply will start only after inking of buying agreements.

"Board (Coal India) agreed ....(that) coal companies might sign FSA (Fuel Supply Agreement) without insisting for long-term PPAs," Coal India said in a letter to its subsidiaries.

A power purchasing agreement (PPA) is signed between a power producer and a buyer usually a electricity distribution company.

The letter further said that, however, the commencement of coal to power generations companies will be subject to "furnishing long-term PPA with discoms."

The proposal had come up for consideration during the board meeting held recently.

Coal India in the letter said that a decision at the level of Prime Minister Office was taken regarding signing of FSA with new power plants without waiting for PPA, subject to condition that the supply of coal will commence only after the plant is commissioned and long-term PPA is signed.

"It was further decided that the supply of coal will be restricted to the quantity required for generating electricity to meet the commitment as per PPA," the letter said.

The company asked its subsidiaries "to take necessary action in this regard."

PPA has been stumbling block in signing of FSA between power plants and CIL.

So far, 62 power plants have signed FSAs with CIL. A few have refused to sign fuel supply pacts citing varied reasons.

India's largest power producer NTPC has refused to sign FSA, saying CIL was supplying poor quality coal.

NTPC buys close to 140 million tonnes of coal to fire its thermal power plants. The company has not signed FSAs for 4,500 MW power generation capacity.

Shares of Coal India were trading at Rs 326.55 per scrip in the afternoon trade.