Shinde knocks on PMO’s door over Coal India’s FSA

Power Minister seeks PMO’s intervention mandating Coal India to ink FSA

Written by Priyadarshi Siddhanta | New Delhi | Published:May 14, 2012 12:24 am

Power minister Sushilkumar Shinde has sought Prime Minister Manmohan Singh’s Office’s intervention in mandating Coal India Ltd to ink Fuel Supply Agreement (FSA) within a month in its 2009 format.

In his May 9 letter to the Prime Minister’s Principal Secretary Pulok Chatterji,Shinde expressed concern that the FSA finalised by the miner is heavily tilted in its favour. He said the penalty of 0.01 per cent with zero penalty for the first three years has triggered concerns among power utilities.

The power minister points out the lopsided agreement by stating that in its 2009 version all disputes were to be referred to the Centre whereas in the fresh one CIL would decide the issue on its own and,in case of any disagreement coal supply would be discontinued.

“I understand that the model FSA which has been finalised by CIL has diluted the disincentive (penalty) to such an extent that it will have no impact on the PSU in the event of non-supply of coal. Besides FSA,there are issues like re-gradation of coal,force majeure and automatic sampling,which are heavily loaded against power producers and will create uncertainty and confusion,” Shinde told Chatterji.

Shinde’s letter comes amid reluctance by major power generation companies to ink FSAs as they are apprehensive that in the eventuality of CIL’s inability to supply coal,it can still walk away without any financial obligations.

Seeking Chatterji’s intervention in this connection,the power minister sought that CIL be directed to sign FSAs with companies compulsorily within this month based on the 2009 version of FSA.

“Further,in case the penalty provision is to be at the level proposed by CIL,the trigger level of disincentive should be restored to 90 per cent as was the clause in 2009,” Shinde told Chatterji.

However,power secretary P Uma Shankar had earlier told the PMO that CIL’s ability to supply only 347 million tonne (MT) of coal against a requirement of 410 MT is of grave concern. Persistent coal supply can jeopardise production to the tune of 25 MW,he had contended.

So far,10 companies have inked FSAs with Coal India and more than 35 are in the queue.

“But pressure is mounting on this ministry to insist CIL on having a re-look at its penalty provisions,” a senior coal ministry official said.

In its 2009 format,CIL has been supplying at a trigger level of 90 per cent and a penalty level in proportion to its failure to supply the contracted quantity.

Coal supply by the maharatna company has not been encouraging during April 2012,a power ministry official said. He said the despatch of the fuel to power utilities during April has been 26 million tonne against a target contracted quantity of 30 MT,he said. The level of pithead stock in Coal India as on April 30,2012 is 67.08 million tonne.

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