The long drawn tussle between two Maharatna companies – Coal India ltd (CIl) and National Thermal Power Corporation (NTPC) – over the issue of signing fuel supply agreements (FSAs) meant for augmenting thermal coal supply to power plants poses a serious threat in the near future to the nation’s ambitious power generation programme as both the state-owned entities are slugging it out over quality of dry fuel available domestically.
According to informed sources, the PMO, which has intervened in the past to resolve the matter, may soon summon both CIl and NTPC with a stern message to fall in line keeping in mind the criticality of the issue.
Due to differences simmering between the two companies, the signing of FSAs – which would allow supply of thermal coal to power plants at 80 per cent trigger level (meaning the minimum supply levels to be maintained by CIl for facilitating coal linkage to plants) and on a long term basis – has remained stalled since September 2012.
Though coal supply was being maintained to power plants through previously signed MoUs between CIl and NTPC, as both are state-owned entities and cannot afford to hamper power generation and supply keeping in mind the national interest, these MoUs expired on March 31, 2013. These were to originally expire by December 31, 2012, but had been extended for three months owing to the FSA impasse. Moreover the MoUs are based on supply of coal on short term basis, while the FSAs once they are inked, would ensure long term coal linkage to plants.
While official sources confirmed that these would be further extended by another three months, it is being feared that if the deadlock between CIl and NTPC continued over signing of FSAs, then this may hamper coal supply to plants in the near future as the MoUs cannot be extended till infinity.
Therefore keeping in mind the gravity of the situation, the PMO may soon call a meeting of the two companies on resolving the matter. The PMO in October 2012 had directed CIl to sign all FSAs by end of November 2012, however owing to differences first over the quantum of trigger level to be maintained and now over quality of coal, the deadline could not be honoured.
NTPC, the nation’s thermal power producing giant has refused to sign the FSAs with CIl, complaining that the coal being supplied to it is of extremely poor quality – in technical terms having less than 3,100 kilocalorie per kg (kcal per kg) of gross calorific value (GCV), which is equivalent to low quality F grade of coal. The power company has said that using the poor quality coal would damage its boilers in the long run and therefore CIl should have the desired infrastructure to wash such coal before supplying it.
CIl on its part is irked by the fact that NTPC has demanded that a condition to be inserted in the FSAs stipulating that the coal supplied to it should have the GCV of more than 3,100 kcal per kg. The coal behemoth has objected to NTPC’s “arbitrary” demands regarding changes in FSAs, as it has all along maintained that the draft of the fuel supply pact cannot be changed and all customers would have to adhere to it.
While CIl has indicated that it is willing to wash the coal (thus enhancing its quality in the process) and then supply it to NTPC, it has at the same time made it clear that the power generator would then have to mandatorily lift the washed coal (of course at an enhanced price as washing would upgrade the coal’s quality and also the price).
In fact NTPC Chairman Arup Roy Choudhury recently told The Pioneer that the matter regarding quality of coal needs to be discussed with the Government (read the PMO), thus indicating that an impending meeting of the two companies with South Block mandarins is in the offing.