Power cos see red as CIL seeks fresh supply terms

Triggering a dispute that could affect several thermal power producers, Coal India has sought revised terms for fuel supply to projects. Coal India subsidiaries are demanding fresh fuel supply agreements (FSAs) with terms & conditions that are different from the model pact finalised by the Central Electricity Authority in consultation with Coal India. Thermal power producers are so concerned that the power ministry has taken up the issue with the coal ministry on a priority basis.

The demands of coal companies include FSA for five years instead of the current practice of signing pacts for 20 years. Coal companies also want guaranteed supplies to be reduced to 50% instead of 90% now. They also want to have the option to supply shortfall arising out of lower coal imports.

The power ministry feels the changes will affect thermal power projects and make financial closure difficult. “...I shall be grateful if the coal companies are advised to sign FSA for new projects under implementation as per the model FSA agreed for existing thermal power projects to enable execution of the FSAs at the earliest. This would ensure that commissioning of upcoming projects is not delayed for want of coal supply,” power secretary HS Brahma has said in a letter to coal secretary C Balakrishnan.

Industry sources said on condition of anonymity that strategy of the coal suppliers could result in litigation. The power ministry has already informed the coal ministry that the proposed changes in FSA is not acceptable, they added. The industry’s view is that unnecessary hurdles are resulting from the demand for revised FSAs.
Coal India subsidiaries are the primary suppliers of coal to India Inc which also imports the fuel to meet shortfalls in availability. Central Coalfields Ltd, Eastern Coalfields Ltd, Bharat Coking Coal Ltd, Western Coalfields Ltd, Mahanadi Coalfields Limited, South Eastern Coalfields Limited, North Eastern Coalfields Limited and Northern Coalfields Limited are among the subsidiaries of Coal India.

In any case, power units have been complaining about slow coal supply and lack of adequate stocks of coal. Power production at many units have suffered due to lack of coal and many of them have complained about running out of stock.

The power secretary has pointed out that power projects are capital intensive and modification of FSA is not economically viable. Thermal power producers will not be in a position to achieve financial closure if the fuel supply guarantee is cut down to 50% and the validity of the agreements are reduced to five years, he has highlighted. He has mentioned Rajiv Gandhi Thermal Power Plant at Hissar with a capacity of 1200 mw, Budge Budge unit with a capacity of 750 mw and Rosa Thermal Power Plant of 600 mw as examples of some units which are awaiting execution of FSAs.

“In particular, I would also like to point out the case of M/s Rosa Power Supply Co Ltd who have informed that they have a valid FSA with CCL (Central Coalfields Ltd) for a period of 20 years with provision of guarantee at 90% of ACQ (allocation of coal quantity). CCL has advised them to execute a new FSA...any change in the provision of the FSA at this stage would be detrimental to the project...,” says the power secretary’s letter. The promoters of the project have said that it will be operational soon.