Coal users demand exit clause in linkage agreement

Planned auctioning of coal linkages, it appears, might be a tougher call for the government than putting coal blocks for bidding, which has already made a successful beginning after the last month’s auctioning process.

Coal using industries have demanded for an exit clause in the linkage agreement amid concerns of getting trapped in a long-term contract at a time of falling global prices which could be a losing proposition for them, SBI Caps, the consultant appointed to decide on the modalities of the auction, has told the ministry.

“Since coal prices in the international market fluctuate, bidders should be given the exit option in the fuel supply agreements or FSAs after a certain lock-in period. It was also suggested that escalation factor should also allow for a decrease in coal price as globally coal prices move in both positive and negative direction,” SBI Caps said in its briefing to the Inter-ministerial Committee, after meeting officials of steel ministry, department of industrial policy and promotion and several industry bodies like Cement Manufacturers Association.

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