Power ministry yet to decide on trigger point for FSAs

The power ministry is yet to take a view on the amended terms of the new fuel supply agreement that proposes to lower the trigger point to 65% from 80%, a senior official said.

“We are studying the impact of the new format for the fuel supply agreement and will take a view on it in a couple of days,” Union power secretary P Uma Shankar told ET. “A 65% trigger point would actually mean a 55% plant load factor for the power generating units, which may be too low. We need to take a critical view and find out if it suits the power sector.”

A trigger point is the level of the contracted fuel that the supplier (Coal India in this case) promises to deliver to the power units. If supplies fall below this level, Coal India will have to pay a penalty, which will be a percentage of the shortfall.

The fuel supply agreement proposed by Coal India earlier had set the trigger point at 80% and the penalty at 0.01% with a three-year moratorium. This was rejected by most of the power producers including state-run NTPC, who said the terms were heavily biased in favour of Coal India.

After the Prime Minister’s Office intervened, Coal India tweaked the terms of the agreement reducing the trigger level to 65% and raising the penalty to 10%.

Last week, Coal India Chairman S Narsing Rao managed to convince PMO officials that the company cannot supply more than 65% of contracted fuel. Rao, however, agreed to raise the trigger point to 80% in five years.

“We will be able to supply only 62-65% of the contracted volume to the power plants that, too, if our production targets go according to plans in the current Five-Year Plan,” Rao had told ET earlier. “Only during 2016-17, the terminal year of the 12th Five-Year Plan, we hope to meet 80% of the contracted volume.”
Source: ET


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