Western Coalfields, a subsidiary of Coal India, is looking to sell expensive coal from its cost-plus mines to captive power plants as commercial power projects with which it had inked letters of assurance (LoAs) for fuel supply have declined to seal final contracts, citing high coal costs.
According to industry sources, Ideal Energy, Abhijeet Group, Vidarbha Industries and state-owned NTPC are the firms which have held back from signing FSAs with WCL for their plants at Bela, Nagpur, Butibori and Mouda respectively. These plants with capacity totalling 1,610 mw are unable to run due to non-availability of coal.
Instead, the project developers are insisting on taking supply from mines which are subject to Coal India’s notified price. Their argument is that there is no mention of cost-plus pricing in LoAs signed with WCL and their projects could become unviable if coal is made available to them at this price. A WCL official told FE the four companies are not coming forward to sign FSAs despite being issued LoAs.
Price for coal available from WCL's cost-plus mines is 10% higher compared to CIL’s price. Unlike commercial power plants, captive projects set up by industries like textiles, steel and aluminium are not entitled for fuel supply at regulated prices and they mostly depend on the free market to meet coal needs.
As a policy, public sector coal suppliers sign LoAs with bulk consumers from power and other industries before formalising FSAs with them.This is meant to offer comfort to customers in the absence of FSAs.