Hopeful of a solution between CIL, NTPC over FSA soon: Coal Ministry

The Coal Ministry on Friday said it is hopeful of a solution soon to disagreement between power major NTPC and CIL over introduction of some new clauses in the fuel supply agreement.

“NTPC has raised some issue and we are looking into it. I hope, the board and the government will find some solution to this issue,” additional secretary, Ministry of Coal, Zohra Chatterji said at the Skoch Summit here.

Stressing that “Fifteen FSAs (fuel supply agreements) have been signed by power companies so far,” Chatterji said, “FSA document has already been approved and sent. Now, it is upto the power companies to come forward and sign the agreement.”.
NTPC and many power companies have refused to ink fuel supply pacts with Coal India Ltd (CIL), disagreeing with introduction of new clauses.

In a letter to the Coal Ministry last month, the Power Ministry had flagged concerns raised by power producers regarding the model FSA and had requested the Coal Ministry to ensure that CIL inks fuel pacts with power companies within a month based on 2009 model FSA, by only changing the minimum supply level to 80 per cent.

The new FSA states that CIL is not liable to pay penalty for the first three years (from the date of signing the pact) even if there is supply shortfall. This as well as clauses related to ‘force meajure’ and compensation for stone content in the fuel, are being opposed by power companies.

CIL, however, has stated that the clauses it introduced in the new model FSA are aimed at protecting the PSU’s interest.

On the other hand, the Power Ministry has contended that the model FSA, finalised by CIL has diluted the disincentive to such an extent that it would have no impact on CIL in the event of non-supply of coal. The disincentive starts only after three years and that too had been reduced to a mere 0.01 per cent, the letter had pointed out.

In the earlier FSAs, in case of any disagreement between the developer and CIL, the issues were to be referred to the Government of India whereas now CIL would decide the issue on their own and in case of disagreement, the coal supply will be discontinued.

Earlier, NTPC Chairman and Managing Director Arup Roy Choudhury had said the company would sign the FSA only with a change in the trigger point, “because that is the direction given by the government. Why should I accept 10 or 15 more changes”.

The government, in April, had issued a directive to Coal India to commit itself to a minimum of 80 per cent of fuel supply to power producers, failing which it would attract penalty. The directive was issued following a meeting between the power sector honchos and the PMO.
Source: ET


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