Coal India (CIL) board is likely to meet early next week to approve the model fuel supply agreements (FSA) for supply of coal to power firms with significant changes, including the penalty clause.

The development follows the board of the public sector firm agreeing on paying penalty between 1.5 and 40 per cent on CIL failing to supply the committed quantity of the fuel to power firms.

“CIL board may meet on August 13 to approve the model fuel supply agreements with changes, including penalty,” a source close to the development said.

The board of the coal PSU at its meeting held on August 7 had decided that if CIL supplies below 50 per cent (of the contracted quantity), the fine would be 40 per cent of the value of fuel not supplied.

If the supply is between 65 and 80 per cent, then the penalty is 1.5 per cent, the company had said.

For supply between 60—65 per cent of the contract, CIL would attract a penalty of five per cent, while the penalty is 10—20 per cent for providing coal between 50—60 per cent of assured quantity.

There will be no penalty if Coal India supplies 80 per cent or above the committed quantity of the fuel.

Coal India Ltd (CIL) has already reached a consensus on supplying a minimum of 80 per cent of the contracted quantity to power firms.

The issue of penalty has been a bone of contention as power firms, led by NTPC, had been opposing the “meagre” penalty clause of only 0.01 per cent, that too applicable after three years of shortfall in the earlier pact. They have also refused to ink to fuel supply agreement.

Of the committed 80 per cent of the assured supply, CIL would meet 15 per cent through imports and 65 per cent through domestic production. It is estimated that CIL would need to import 20 million tonnes of coal this year to meet the demand of power companies.

To offset the impact of high import costs, Planning Commission had said CIL should adopt a pooling formula on prices by combining rates of imported and domestic coal.

The company said the board in-principle approved pooling of prices.

“We have no objection to implement pooling of price if it is acceptable to stakeholders,” CIL Chairman and Managing Director S Narsing Rao had said.

He had further said basic decision of board is over, while the rest is operational details which the Central Electricity Authority will work out.

So far, only 29 power companies, including Lanco, Reliance Power (Rosa plant) and Adani have signed FSAs with the state-run coal giant.

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