Power and Coal Ministries asked to resolve differences

In view of the stalemate on the pooling price of coal, the issue is now set to go to the Cabinet. The Prime Minister’s Office has suggested that the Union Coal Ministry prepare a note on this for consideration by the Cabinet.

At the meeting taken by the PMO, the pending issue of fuel supply agreements (FSAs) was also discussed, with the Coal and Power Ministries asked to resolve differences and to operationalise the pacts. The matter has been in a logjam since April this year.

November 30 was the deadline for signing the FSAs, but so far only about 33 agreements have been signed. The National Thermal Power Corporation, Coal India Limited’s (CIL) biggest consumer, has so far stayed away from it.

Sources said it was decided that no extensions would be allowed and the supplies now being made against letter of assurances (valid till December 31, 2012) would draw to the close on the last day of the year. The monopoly producer has also been asked to sort out issues flagged by the power sector in the draft FSAs.

Pooling the price of imported coal with that of domestic coal has been proposed as a mechanism for enabling CIL to feed the power sector and meet the contractual obligations which it has been asked to enter into through the FSAs. A trigger level of 80 per cent has been set, below which CIL would attract penalties for short supply.

Hamstrung by many problems, CIL’s present production levels would allow it to meet only 65 per cent of its contractual obligations. The rest is to be met through imports and the price of domestic coal (which is lower than imported coal) was to be pooled to arrive at an average price for the 15 per cent that would need to be imported.

However, fearing a resultant hike in tariffs, this was opposed by many power producers.

CIL’s independent directors too had voiced their reservations, criticising this policy as a ploy to help private sector power producers.

More In: Industry | Business