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Corporate Jul 4, 2012

Fuel pacts deadlock may end after PMO intervention

New Delhi: The coal ministry today expressed hope the deadlock over fuel supply pacts with the power ministry would end within 15 days with the intervention of PMO which is meeting next week to resolve the issue.

"Discussion with the Prime Minister's Office (PMO) is underway on fuel supply agreement (FSA). I am hopeful that the issue will be resolved in 15 days and remaining pacts will be signed," said Coal Minister Sriprakash Jaiswal.

The PMO, sources said, has called another meeting next week to resolve the issue.

Coal Minister Sriprakash Jaiswal. Image courtesy PIB

Last month, in a bid to resolve the fuel row, it had asked the CIL to sign the pacts with power producers with assured minimum coal supply of 65 percent of the commitment. However, sources said the power ministry is not agreeing to this.

"The power ministry is saying that banks are not accepting the 65 percent trigger level (for penalty on CIL) as against the earlier directive of 80 percent supply assurance," sources close to the development said. The PMO would deliberate on this next week.

Once the issue resolved, it will pave the way for power major NTPC and others to sign pacts with CIL.

Only 27 power plants, of 48 in all, have so far signed FSAs with the state-run coal giant. These include Adani's Mundra Power plant, Lanco's Anpara Power, Reliance Power's Rosa Power Project and CESC.

NTPC and many power companies have refused to ink FSAs with CIL, disagreeing with the introduction of new clauses.

Jaiswal said his ministry could also soften its stance over the FSAs if required.

"We may soften our stance if PMO asks and if it is in the interest of the nation," he said.

The minimum penalty clause in the FSAs is a bone of contention between the coal and power ministries, as the power firms are opposed to it. The clause states that CIL is not liable to pay penalty for the first three years of the pact even if there is a shortfall in supply.

The government, in April, had issued a directive to CIL to commit itself to a minimum 80 per cent of fuel supply to power producers, failing which it would attract penalty.

On imports by Coal India to meet the FSA commitments, he said, the quantum of dry-fuel to be imported is yet to be decided and deliberations on the issue are on.

Meanwhile, CIL today said it is awaiting consensus on the FSA with power companies. Its chairman and managing dirtector S Narsing Rao in Kolkata said today that if a consensus is achieved, then its board will take up the issue in the meeting on 10 July.

About dry-fuel production, Jaiswal said there was a need to augment it in view of country's growth, specially the requirements of power, steel and other sectors.

He exuded confidence that "Coal India will record a 7-8 percent growth this year" stressing that it will achieve its production target for the fiscal.

The government has fixed a production target of 464 million tonnes (MT) for CIL, which accounts for over 80 percent of the domestic output.

Last fiscal, the PSU achieved an output of about 435 MT of coal as against a revised target of 447 MT.

PTI

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