NTPC ends row with Coal India over fuel supply agreement; accepts changes proposed by PMO

26 JUN, 2012, DEBJOY SENGUPTA, ET BUREAU
Kolkata: The country's largest power producer NTPC has accepted the changes proposed by the Prime Minister's Office in the new fuel supply agreement, ending the standoff with Coal India.

"We have no issues as long as CIL supplies coal. We have been given to understand that the company cannot supply more than 65% in the first year, and that is all right with us," NTPC chairman and managing director Arup Roy Choudhury told ET on Monday.

Earlier this month, the PMO directed Coal India to fix the penalty for shortfall in supplies at 10%, against the earlier 0.01%. It also set the trigger point for the penalty at 65% of the commitment for the first year, which would be raised to 72% in the fourth year and 80% in the fifth year (2016-17).

State-run Coal India, which accounts for about 80% of the coal produced in the country, is likely to take a final call on the revised terms early next month.

Choudhury said NTPC would meet the shortfall in supply through imports.

The state-run power generator had earlier declined to sign the fuel supply agreement for plants commissioned after December 2009, saying the pact was lacking in commitment.

Similarly, state-run Damodar Valley Corp and some private sector power generators had earlier rejected the fuel supply agreement saying it was skewed in favour of Coal India.

These utilities have now agreed to the revised terms.

A senior official of DVC said, "We have agreed to the proposal that the trigger point be reduced to 65% in the first year and gradually increased to 80% by 2016.

The other clauses that made the FSA biased towards CIL will be removed."

The DVC official added, "In fact, we have decided to sign the agreement in the old format with 65% trigger.

The old format does not include force majeure clauses like break down of machinery, non-availability of spares and power."
According to estimates, the state-run miner will have to supply over 50 million tonne of coal through the new FSA. About half of this quantity will go to the new generation capacity added by NTPC, the largest consumer of coal in the country.

The PMO has also asked CIL to remove the clause that gives a three-year moratorium on penalty if the coal miner fails to meet its supply commitment. CIL has also been asked to modify clauses that allow it to review and amendment delivery levels. The new agreement also incorporates a clause that will only compensate for oversized stones at 0.75% of total supply in a year.