CEA requests Power Ministry to seek PMO help on fuel pact

Power sector planning body CEA has sought PMO intervention on fuel supply agreement as several companies have refused to sign pact with Coal India (CIL) amid differences over penalty to be paid by the coal firm if it fails to supply 80% of the contracted fuel to them.

In a letter to the Power Ministry, CEA has requested that the matter be taken up with the Prime Minister's Office so that the FSAs (fuel supply agreements) could be signed.

Last month, a Presidential Directive was issued to CIL forcing it to sign FSAs with power companies at 80% commitment levels or pay penalties.

 

The Central Electricity Authority's request to the ministry comes ahead of its meeting with power firms, which have not signed the FSAs, on Wednesday.

"Coal India has placed an entirely different FSA which is detrimental to the interests of the power sector," CEA has said in the letter.

The recently released new FSA, which is being insisted on by coal companies is monopolistic in nature and pro-coal companies, the letter stated.

CEA has also requested the government to re-look some of the clauses of the FSA.

It said, "The rate of compensation for the "Failed Quantity" is 0.01%, which is too little a penalty for non-fulfilment of obligations and that too is applicable after three years."

"It is hardly a disincentive and won't discourage low fuel supplies," it said.

The missive also insists that the provision for sampling of coal at both loading and unloading ends and through third party agency should be done.

The power companies have said the seller should not sell low quality coal and in case it is supplied, the purchaser is not liable to make any payment including rail transportation.

The supply of imported coal should be based on mutual consultations preferably in line with supply of imported coal being made by Minerals and Metals Trading Corp or State Trading Corporation, the letter said.

Country's largest power producer NTPC has refused to sign the FSA as the company wants the useful heat value (UHV) formula for coal instead of the new gross calorific value (GCV)

formula proposed by CIL, the country's largest supplier.

Indian coal is classified on the basis of UHV into seven grades from A-G. UHV is based on ash and moisture contents for non-coking coals in line with the government's directive.

These grades are wide, while under the GCV method, the bands would be narrower, closely resembling their quality.