Coal consumers may need separate agreements with logistics providers

With the Indian Railways dithering on the proposed Fuel Supply and Transport Agreement (FSTA), coal consumers in different sectors across the country need to ink separate agreements with the logistics provider for ensuring smooth supplies of coal.

“The Indian Railways seem to be non-committal on the issue of FSTA and it has not communicated anything on this issue for long. I don’t see any breakthrough on the FSTA front and without this agreement, the coal consumers have to enter into separate pacts with the logistics providers for securing coal supplies”, a top official of Coal India Limited (CIL) told Business Standard.

FSTA proposed in the new coal distribution policy of the Union coal ministry is a tripartite agreement involving the coal producers, coal consumers and the logistics provider-the Indian Railways.

The Union coal ministry, CIL and the coal consumers have agreed on the draft FSTA that has been framed. The proposal is now pending with the Ministry of Railways.

In case of FSTA, the Railways will have to enter into an agreement with the coal producers and the coal consumers to carry the promised quantity of coal at a specified time. The Railways may have to bear the compensation cost in case of failure to carry the agreed quantity of coal or even failing to provide the agreed number of rakes.

Meanwhile, CIL expects to sign the Fuel Supply Agreement (FSA) with the different power producers in the country by March this year.

“Most of the issues pertaining to the FSA have been resolved with the power producers and CIL expects to ink this agreement by March this year. The trigger level for coal supplies to the power plants is also likely to be raised from 75 per cent to 90 per cent. National Thermal Power Corporation (NTPC) has to take the lead in signing the FSA with CIL”, the official added.

Power plants in the country had demanded that CIL should raise the trigger level to 90 per cent falling which they would not sign the FSA. The demand was made by the power producers amidst inadequate coal supplies which had slipped many power plants in the country into the critical and super critical states with coal stocks of less than seven days and four days respectively.

According to the new coal distribution policy, 75 per cent of the normative requirement of coal consumers would be considered for supply through FSA at notified prices to be fixed and declared by CIL. The coal consumers were to source the balance 25 per cent of heir coal requirement either through e-auction or through imports.

As per the policy, the coal consumers in all sectors with a coal requirement of over 4,200 tonnes per annum were required to enter into FSA with CIL. For consumers with a coal requirement of up to 4,200 tonnes per annum, the distribution of coal would be through agencies nominated by the state governments.