CIL may review ‘force majeure' clause in FSAs

A meeting between the chairmen and managing directors of Coal India (CIL) and NTPC here on Sunday last, the first such since a change of guard at CIL, failed to break ice over the issue of signing fuel supply agreements (FSAs), even as the discussions are being seen as a sign of a thaw between the two corporates.

A possibility that has emerged from the meeting is that CIL may need to take a relook at some of ‘force majeure' clauses that it has set in the draft FSAs that power companies would need to sign with it. The meeting was held between Arup Roy Chowdhury, Chairman and Managing Director, NTPC, and S. Narsing Rao, Chairman and Managing Director of CIL.

Also present at the meeting were the Director (Operations) of NTPC and two of its executive directors, the director technical of CIL and a senior marketing official.

The meeting was held in the backdrop of the stalemate over the FSA issue, whereby CIL's single largest customer, NTPC, has not yet signed a single FSA although CIL, in keeping with a government directive, had hammered out a draft and had put it up on its website within the stipulated deadline of April 20. The FSA is applicable to newly-commissioned power plants which have entered into power purchase agreements with distribution companies.

NTPC is learnt to have pressed for reverting to the earlier format of FSAs. However, CIL took the view that it was not possible to have two sets of FSAs — one for NTPC and another for others.

Some 20 FSA pacts have been sealed so far, including some with state power utilities and some with smaller private power producers.

More than the penalty clause, what is bothering NTPC are the ‘force majeure' clauses that have been incorporated in the FSA, which, the power major feels, indemnifies CIL against every factor — avoidable and unavoidable — which can disrupt production and supplies. Following the discussion, a possibility has emerged that CIL may review these aspects.

The other major issue and an equally contentious one that figured during the talks was that of the change-over by CIL from January 1, to the gross calorific value (GCV) system of coal pricing against the earlier useful heat value (UHV) system. NTPC said that in the absence of inadequate infrastructure, issues such as joint sampling were becoming a problem.

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Printable version | Jan 28, 2022 3:19:20 PM |

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