Damodar Valley Signs Fuel Supply Agreement (FSA) with CIL - NTPC and Private Companies expected to follow suit

Damodar Valley may Power More FSAs

Yielding to pressure from power lobby, CIL changed the original format to include penalties for non-supply of coal in pact

 

The coal shortage faced by the power sector is likely to ease after key customers of Coal India signed fuel supply agreements (FSAs) that were delayed for more than a year. This will enable power companies to fire up capacities that were ready, but lying idle for want of coal. While Damodar Valley Corporation signed an agreement with CIL-subsidiary Mahanadi Coalfields last week, NTPC and private companies are expected to soon follow suit. Some 50-odd FSAs are likely to be signed.

 

DVC’s deal is important because it was among the companies that refused to sign an original agreement formulated by CIL. DVC, NTPC and other public sector power generators had entered into negotiations with CIL and the ministry to formulate a revised agreement.

 

“Last week, we signed the FSA with CILsubsidiary Mahanadi Coal Fields,” DVC chairman RN Sen told ET. “Another set will be signed with other CIL subsidiaries — Eastern Coalfields, Bharat Coking Coal and Central Coalfields.” He said the new agreements will be signed for units that have come up at Koderma Thermal Power Station, Durgapur Thermal Power Station, Mejia TPS, Chandrapura TPS and Bokaro TPS.

 

DVC, along with a host of other companies, suffered from low coal supplies and reduced generation at its new power units because it did not sign the original agreement, claiming that it was heavily biased in favour of the coal monopoly. “A number of units at DVC have not been able to start commercial production because of non-availability of coal,” said Sen. “Now that the FSAs are being signed, we hope to attain commercial production of these units (Koderma 1 & 2, Durgapur 2, and Raghunathpur Thermal) soon.”

 

Ashok Khurana, director general of the Association of Power Producers, said power producers will now start signing the FSA because most companies have no other option. “Small buyers have no choice, but to sign the FSA because we have been told that CIL will no more supply coal to power producers under the memorandum of understanding. This is for all power producers except NTPC, which is the largest buyer from CIL,” he said. Yielding to pressure from the power lobby, CIL changed the original format to include penalties for non-supply of coal under the agreement. Nevertheless, CIL will supply only 65% of the requirement under the agreement from domestic sources, while another 15% will be through imports.

 

“We are meeting CIL top bosses, including the chairman, on Monday to discuss the finer points of the FSA that will be signed,” NTPC chairman Arup Roy Choudhury said. At present, imported coal will be supplied by CIL on a cost-plus basis, meaning consumers will have to pay for the cost of coal plus any additional expenditure incurred by it for handling the material. The power sector, along with the coal ministry, is working on a price pooling mechanism that will take into account the cost of imported coal, and this is expected to increase the cost of coal.

Source: Economic Times