The Coal India board stopped just short of an agreement on
revision of the existing fuel supply agreement (FSA) on Tuesday.
While the members agreed to keep the trigger level unchanged, there was no
consensus on fixing a revised penalty structure another board meeting would
now be convened to take that issue forward.
As per the FSA, Coal India must supply at least 80% of the
fuel contracted to power producers need be, through imports or pay a
penalty, which was earlier fixed at 0.01% of the shortfall.
“We are revising the FSA approved by the board earlier, on
April 16. Trigger points remain at 80%. There are changes on the penalty. We
have proposed different penalty levels. On this issue of penalty, we have
postponed the decision and the board would be meeting again,” Coal India
chairman Narsing Rao told reporters after the board meet.
The development comes just as UK-based The Children's Investment
Fund (TCI) is reported to have moved the Delhi High Court against the Coal
India management, raising issues ranging from pricing to corporate governance.
Keeping the trigger level at 80% is being seen as a
climb-down by the Coal India board as Rao had earlier tried to convince the
Prime Minister's Office (PMO) that it has to be brought down to 65% considering
Coal India’s existing production capacities.
“Roughly, we are expecting ourselves to supply 60-65% of the Letter of
Assurance quantities from our own sources, according to our plans. The
difference between that and the 80% level, or about 15%, has to be imported by
us if they want us to import,” Rao had said while announcing the financial
results for 2011-12 in May.
Later, during his meeting with the PMO in June, convened by
principal secretary Pulok Chatterji, Rao reportedly pressed for lowering the
trigger level to 65% as a condition for agreeing to a revised penalty from the
existing 0.01%, which is seen as being too low.
Tuesday's board meeting, which happened after several rounds
of deferments, was called following protests by the power producers, notably
NTPC, the biggest of them all, against several clauses of the existing FSA,
which they complained were loaded in favour of the near-monopoly coal producer.
The board also took up the issue of imports, which has been
built into the existing FSA, and whose quantities would soar as Coal India's
domestic supplies could rise only up to 65% of the contracted amounts despite
keeping the minimum supply guarantee at 80%.
“On aggregate, we would be supplying 65% of domestic coal,
so imports would be about 15%. On imports, we have agreed. It is practicable
only when we do price pooling. There is broad agreement, but the nitty-gritty
of this we have to further confirm. The amount of imports would vary depending
on demand. This year, there could be imports of about 18-20 million tonne,” said Rao.
Rao indicated that the mechanism of price pooling would be
done by the Central Electricity Authority and not Coal India.
Import would be done either by Coal India or by state-owned importing agencies.
The next board meet to finalise the FSA and the penalty
levels would take place “as soon as possible”, said Rao.
Source: DNA
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