The NTPC and Coal India have agreed to sign new fuel supply agreements (FSA) on 2009 terms. The only change is the trigger level, which has been scaled down to 80 per cent from 90 per cent, as directed by the Prime Ministers’ Office.
The trigger level is the point up to which Coal India has to meet the supply commitment.
“We already have an FSA with Coal India. We will change only one clause – that is the trigger for incentive and penalty,” Mr Arup Roychowdhury, Chairman of NTPC, told Business Line.
When asked whether Coal India had agreed to this condition, Mr Roychowdhury said, “Yes, they have agreed. The Coal Ministry has directed them to sign it. It will happen any time soon.”
When asked whether this means that NTPC is getting preferential treatment, he said NTPC’s case was different from other private developers who are opposing Coal India’s new FSA. NTPC has to sign new FSAs for its brownfield projects unlike others who have greenfield projects.
NTPC’s argument is that two different FSAs for the same station will create operational problems. “We already have three units working under the earlier FSAs and there is a fourth unit coming up in the same place for which we have to sign the new FSA. It’s not like this for others,” Mr Roychowdhury explained.
The power producer will sign fuel supply pacts for 4,300 megawatts. Currently, it is sourcing coal based on a memorandum of understanding signed with Coal India for these projects.
The power producers were irked by Coal India’s new clauses in the FSA, which has brought down the penalty clause to as low as 0.01 per cent and has the liberty to discontinue supplies at any time.
POINTERS: Contentious issues
1. Penalty clause reduced to 0.01 per cent
2. For three years from the date of signing of FSA, there will be no compensation.
3. For non agreement during review, aggrieved party can terminate the agreement.
4. For non acceptance of change in coal distribution system CIL has right to terminate the agreement.
5. No provision for inter project transfer of coal for efficient operation
6. No provision for re-declaration of grade.
7. Force Majeure events