No early settlement seen in NTPC-CIL spat

NTPC Director N N Misra refused to acknowledge outstanding dues of Rs 1,000 crore for CIL

An early settlement of the ongoing dispute between NTPC and Coal India (CIL) over coal quality seems unlikely, with both sides having differences over the outstanding dues.

While talking to reporters on Wednesday, NTPC’s director (operations) N N Misra refused to acknowledge the outstanding dues of Rs 1,000 crore to CIL, despite the miner's assertion that supplies will not resume completely until the dues are paid.

Coal secretary S K Srivastava had convened a meeting on Wednesday, asking CIL Chairman Narsing Rao and NTPC Chairman Arup Roy Choudhury to settle the differences. After the meeting, while Choudhury said the two sides had agreed on payment according to gross calorific value (GSV), Rao refused to confirm. Rao, however, said CIL had partially resumed supplies after the coal ministry’s intervention.

Under the GCV system, NTPC has to pay Eastern Coalfields Ltd (ECL) Rs 640 for a tonne of coal, but it has been paying only Rs 300 per tonne since October.

“We have not stopped payments. We have paid to them (ECL) what was their due based on the quality we have received. There is no outstanding amount left from our side,” said Misra.

He, however, dodged questions on the legal provisions under which the payments were stopped to ECL. He said the fuel supply agreement (FSA) does not provide for arbitration on quality. He demanded a technical explanation from CIL for bad quality coal received and said NTPC’s cost had shot up because it was forced to import more coal for blending at Kahalgaon and Farakka power stations.

Since the past week, the two companies have been sparring over the result of joint testing of coal samples. CIL claimed the tests showed higher quality coal was supplied to NTPC’s stations, but NTPC denied this. While ECL, a CIL subsidiary, has been supplying coal to Farakka and Kahalgaon stations for 15 years, the quality issue erupted after the switchover to GCV-based pricing system in January 2012.

Misra said CIL adopted the globally-accepted GCV pricing system, but without global standards of crushing, washing and installing testing equipment.

“Until CIL is able to build their infrastructure required for GCV measurement, or they are able to introduce third-party sampling, payment should be based on the measurement of GCV done at NTPC stations,” Misra said.

Overall, NTPC’s outstanding dues to all CIL subsidiaries have swelled to Rs 2,000 crore. It pays around Rs 20,000 crore to CIL for coal annually.