Coal India board to meet on July 31, decide on fuel supply pacts

The board of state-owned miner Coal India (CIL) would meet on July 31 to decide on the contentious issue of the format of fuel supply agreements (FSAs)with power companies. So far, the meeting has been postponed five times.

New FSAs have become a bone of contention, as a lot of power producers, including NTPC, expressed dissent over the new clauses, including the penalty clause of 0.01 per cent of the value of shortfall, if the firm failed to deliver 80 per cent of the committed coal. Following this, the Prime Minister’s Office (PMO) had, last week, intervened to break the deadlock.

The PMO meeting followed a proposal by CIL to reduce the commitment level to 65 per cent of the annual contracted quantity for the first three years and raise it to 82 per cent in the fifth year. The company had proposed penalty of 10 per cent of the value of the shortfall for supplying coal below 80 per cent of its commitment.

So far, CIL has signed 27 FSAs, and the miner expects the issues to be resolved by the end of this month. Since the total number of firms eligible to sign FSAs rose to 80 till June, more firms are likely to sign. Power entities that have signed FSAs so far include Adani’s Mundra plant, Rajasthan Rajya Vidyut Utpadan Nigam, Lanco Anpara Power and Bajaj Hindusthan.

CIL had initiated signing FSAs after a Presidential decree in March directed it to abide by a PMO directive and sign agreements with power firms. This has forced the company to reconsider its strategy on imports to meet domestic demand, though imports may hit profitability. Last week, the coal ministry had said a decision on whether the Kolkata-based firm would opt for imports would be taken by the end of this month.