Row over non-delivery of coal may be history soon

KOLKATA: The ongoing confusion over allegations and counter-allegations for non-receipt of coal between Coal India, Indian Railways and power producers is set to end in the next two years. The coal ministry, Coal India (CIL), the power ministry and power producers, along with the Indian Railways, have entered into talks to introduce a fuel supply & transport agreement (FSTA).

FSTA will be contractual and binding between CIL, Indian Railways and power consumers where each party will be legally bound to honour their commitments. CIL will have to supply the promised quantity of coal, the railways will have to supply the agreed number of rakes while power consumers will have to buy the amount it arrived at in the agreement. On failure on the part of any party, there will be a provision for penalty.

At present, power producers blame CIL for non-receipt of coal, while at times CIL blames the railways for non receipt of rakes. The railways, on the other hand, blame power producers about excess requirement of rakes. Curiously, as many as 21 power plants now have coal stocks considered critical or super critical while CIL’s reserves have touched 21 million tonne.

“The coal ministry, Coal India and the power producers have agreed on the draft FSTA that has been framed. The proposal is now lying with the railway ministry. All the stakeholders are currently in talks for finalising the FSTA.

Once it is in place, all thermal power plants will enter into tripartite agreements with CIL and Indian Railways for assured supply of coal and rakes. In case any one party misses its commitment, it will have to compensate for it,” CIL director of marketing K Ranganath said. He was speaking to reporters on the sidelines of an interactive session with members of Coal Consumers Association.

The recently-announced coal sale policy mandates that all large consumers of coal need to enter into fuel supply agreement (FSA) with CIL by March 2008. At present, this will bind CIL and consumers by a contractual obligation where Indian Railways will not be involved. FSTA is the next step where transport of this fossil fuel will also be ensured.

Incidentally, Mr Ranganath said: “CIL has decided to sell washed coal to all consumers, except pit head power producers in the next two-three years. We are in the process of inviting global tenders for setting up washeries with capacities ranging between 2.5 million tonne per year (mtpy) and 10 mtpy. As much as 80 mt of coal will be washed and sold on gross calorific value terms in the first phase by 2010.”

The coal sale policy also mandates CIL to meet the nation’s demand for coal and the major is readying itself for imports. It is in talks with MMTC and MSTC for importing the fossil fuel although it is yet to be decided on the volume, said Mr Ranganath.

Commenting on e-auction, which was started in November after a gap of one year, Mr Ranganath said: “Current bid prices through e-auction have been very high but prices are expected to stabilise at around 40-45% over the notified price. CIL has decided to keep the reserve price 30% higher than the notified price. We will gradually sale 30% of total CIL’s production through this mode”.

Interestingly, the coal major has also decided to introduce forward selling of coal through the e-auction format by February 2008. It will be meant for genuine customers and CIL will sell high quality coal from underground mines.