Coal India invites Cos for advice on side pact for coal imports

Development comes at a time when model fuel supply agreement, which the CIL will enter into with power firms, is likely to be placed for approval before PSU board meeting

Coal India has invited companies to provide consultancy services to develop a side pact for supplying imported coal to power firms under the fuel supply agreement in case of production shortfall from domestic sources.

The development comes at a time when the model fuel supply agreement (FSA), which the CIL will enter into with the power firms, is likely to be placed for approval before the PSU board meeting likely this week.

"Coal India Ltd...Has a legally enforceable fuel supply agreement with a power generating company (purchaser) where (it)...Is committed to supply at least 80 per cent of the contracted quantity.

"In the present scenario it is likely that there will be a shortfall in respect of domestic coal... Hence the present policy is to supply the deficit quantity of coal by import...A side agreement is required to be framed in order to deal the terms and conditions for supply of imported coal," the tender documents said.

CIL would appoint an agency both for importing coal and delivering it to the power generating company, the company said.
    
The salient features of  the side agreement includes, "commitment of the purchaser (power generating company) to accept the imported coal at a price to be determined by CIL", which will vary keeping in view factors like type and quality of coal among others, the tender document said.
    
Other features of the agreement includes a comprehensive force majeure clause protecting CIL from vagaries of import business, it said.
    
In the last board meeting the members on the board of CIL had sought some more time to go through the clauses of model FSA and the side agreement minutely.
    
CIL in its board meeting held earlier this month had agreed to paying penalty ranging between 1.5 per cent and 40 per cent on failing to supply the committed quantity of the fuel to power firms.
    
On price-pooling, Rao had said if it is implemented, all the power consumers would have to bear the impact, adding that, however, it should be neutral to CIL.
    
CIL has reached a consensus on supplying a minimum of 80 per cent of the contracted quantity to power firms.
    
The issue of penalty had become a bone of contention as power firms, led by NTPC, opposed penalty in the earlier FSA of a "meagre" 0.01 per cent. They had refused to ink to fuel supply agreement.
    
Of the committed 80 per cent of the assured supply, CIL would meet 15 per cent through imports and 65 per cent through domestic production. It is estimated that CIL would need to import 20 million tonnes of coal this year to meet the demand of power companies.
    
So far, only 29 power companies, including Lanco and Adani have signed FSAs with CIL.