Coal India Limited move on coal supply may push up power tariff

This may leave thermal power plant operators all fired up. The ministry of coal has changed its policy and would now allow Coal India Limited (CIL) to now sign fuel supply agreement (FSA) for only 65 to 75% of the annual requirement of a plant. The rest will have to be imported for which CIL can act as a facilitator.

Earlier, the FSAs were for supply up to 100% of the requirement with a penalty clause if the supply was below 80%. The new policy pertains to the power plants coming up between 2009 and 2015 that have a cumulative capacity of 78,000MW. Many of these are in Vidarbha. On the brighter side, this does not cover state government owned power utility Mahagenco’s plants. The direct impact of the order will be that the power tariffs may be hiked to meet the increased cost on account of more expensive imported coal.

After signing FSA up to 65%, CIL can arrange for rest of the coal through imports on cost-plus basis if agreed by the plant operator, says the order. In case the power company wants to import coal on its own, CIL will be discharged from its liability to import the coal. The new policy will be applicable till the remaining four years of the 12 five year plan.

CIL, which has been a domestic mining company so far, will also be foraying directly into import of coal due to this new policy. The modalities for that were yet to be worked out, said a source in this PSU. Thinking on the issue was going on since quite some time as CIL was unable to supply the entire quantity under FSA due to falling output and an increasing demand.


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