CIL not to supply coal to power units through MoUs

Coal major leaves no option with the power firms but to sign the fuel supply agreements

Kolkata-based Coal India (CIL) has said that the firm is not going to supply coal through Memorandum of Understanding (MoU) route after December, leaving the power firms with no option other than signing fuel supply agreements (FSA).

"The board has decided that we will not sign any more MoUs for supply of coal to power firms. As of now, we are supplying about 49 million tonnes of coal through MoU route, this is one of the reasons why power utilities are hesitant to sign FSAs. We will not supply coal through this mode after December, so these units have to opt for FSAs only," said a top company official.

Earlier this year, the Ministry of Coal had directed to supply coal to power plants commissioned till March 31, 2012 as well as those to be commissioned during 2012-13 through the MoU route as the FSAs were getting delayed. However, even after the state-run coal major came out with the revised draft of FSAs, it had only few takers.

Total 49 units set up between July 2009-December 2011 and another 81 more units, that are and to be commissioned between January 2012 and March 2015, are supposed to sign FSAs with CIL. Out of which, only 30 were signed till now.

When asked about the hesitance from power firms to sign FSAs, Ashok Khurana, Director General of Association of Power Producers (APP), said: “Why should we sign FSAs when there is no assured supply of coal, the new draft is completely one sided. On the one hand they are talking about imports, while even that quantity is not sure. The projects came up after 2009 are struggling for fuel, as CIL refused to sign FSAs and it needed the intervention of the Prime Minister for them to act.”

The coal major has revised penalty slabs in the current FSA structure, doing away with moratorium. The board has also approved cost price model for signing of FSAs, which will provide imported coal at actual cost. CIL had also agreed for a penalty ranging from 1.5% to 40% on failure to meet supply commitments.

In 2011-12, out of the 433 million tonne coal supplied to all the sectors by CIL, the share of power sector was 312 million tonne. However, during the current financial year, while targetting a production of 470 million tonne, CIL hopes to increase power sector share to 347 million tonne.