Monday, August 13, 2012

CIL board may approve changes in model FSA tomorrow
The company said the board in-principle approved pooling of prices. Great News for Power Companies--I was waiting for this day to come..Wow!!. Watch out KSK Energy Ventures Ltd (Rs.68.10), Reliance Power Ltd (Rs.88.90), Adani Enterprise Ltd (Rs.177.40), etc.
Coal India board is likely to approve on Monday the model fuel supply agreement (FSA) to be signed with power firms, with significant changes in the penalty clause for failing to supply to them a minimum 80% quantity of the total fuel contract.
State-owned CIL has agreed to paying penalty of 1.5-40% on failing to supply the committed quantity of the fuel to power firms.
"CIL board will meet on August 13 and may approve the model fuel supply agreements with changes like penalty," a source in CIL said.
The board of the coal PSU on August 7 had decided that if CIL's coal supplies are below 50% of the contracted quantity, the fine would be 40%. The penalty is on the 40% of the value of fuel not supplied.
If the supply is between 65 and 80%, then the penalty will be 1.5%.
For supply between 60-65% of the contract, CIL would attract a penalty of 5%, while it will be 10-20% for providing coal between 50-60% of the assured quantity.
There will be no penalty if Coal India supplies 80% or above the committed quantity of the fuel.
CIL has reached a consensus on supplying a minimum of 80% 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 in the earlier FSA of only 0.01%, that too applicable after three years of shortfall. They refused to ink to fuel supply agreement.
Of the committed 80% of the assured supply, CIL would meet 15% through imports and 65% through domestic production. It is estimated that CIL would need to import 20 million tonne of coal this year to meet the demand of power companies.
To offset the impact of high import costs, Planning Commission had said that 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 detail, 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 CIL.

Courtesy: Business Standard
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