CIL, Gail to get NTPC contract

NEW DELHI, MAY 24: The National Thermal Power Corporation NTPC is negotiating a fresh coal supply agreement with Coal India Ltd CIL. According to the new agreement expected to be concluded within the next few weeks, CIL will assure specific quantities of supplies to NTPC throughout the year and it will also contain the basic quality norms which the supplies will have to adhere to. NTPC is also working out a similar arrangement with the Gas Authority of India Gail which will protect the corporation from any abrupt cut-off in gas supplies by imposing strict penalties on Gail in such an event. The new agreement will be different from earlier agreements as it will carry penalties for any failure of CIL to supply amounts pledged by them under the agreement. Simultaneously, NTPC will be required to pay a penalty in case it fails to utilise amounts indicated by them in their agreement.

According to top sources in NTPC, such supply arrangements are necessary in order to ensure assured supplies for powerstations under NTPC to function in a normal way. Officials explain that if such contracts are in place, planning and execution of funds management as well as transportation planning can be undertaken and implemented. With the setting up of several private companies in the area of power generation, there will be competition for gas and coal supplies. In fact, unless such arrangements are properly made and executed, power generation planning cannot be undertaken at any serious level, officials explain.

As per the current arrangement with CIL, there is a broad understanding about supplies and quality standards, however, the agreements stops short of imposing any penalties on either side for failure to adhere to these schedules. 8220;This hampers a professional arrangement and is rather backward in this modern era of conducting business8221;, say officials.

NTPC has decided to go in for new contracts in order to improve its credibility as well as credit rating in order to help them to raise finances fromFI lenderslike the World Bank. 8220;Such practices are common and unless we adopt some broad reform measures, we may be left out completely in the race for funds from multilateral agencies,8221; the officials add.