Coal India (CIL) has said it will try to complete signing of all fuel supply agreements (FSAs) by December end. CIL chairman S Narsing Rao told FE that though the company was not setting December 31 as the deadline ? ideally it should be over even before that?.
?The board in its September 18 meeting has cleared the changes that have been made in various clauses, especially in the penalty and supply commitment clauses. The company will now have to complete certain formalities including taking opinion of all consumers who are slated to come under the new FSA. The companies are supposed to give their opinion by the end of this month, following which the amendment will be made,? Rao said.
Of the 49 companies coming up with new power plants between 2009 and 2015, only 27 have signed FSAs so far.
Although according to the new FSA terms the penalty has gone up to 40% if CIL fails to meet 80% of its supply commitments, from a level of 0.01% with a moratorium of three years, consumers like NTPC and DVC feel that the FSA is biased towards CIL. However, power firms are not likely to put any further resistance to conditions of the FSA since the clauses have been framed in consultation with the PMO where the NTPC and DVC chiefs are advisers.
Rao said CIL is confident that there will be no outgo on account of penalty payouts since production has grown 6.5% year-on-year in the first five months of the fiscal, enough to meet supply commitments.
?Our prime consideration is getting coal rather than earning on penalty or paying for penalty,? DVC chairman RN Sen said. But Rao said CIL may not have to pay penalty even to those who have entered into FSAs since ?our projections of growth in production are on track.?
Analysts estimated that the company will have to fork out R190 crore on account of penalty in FY13, though Rao denied this. ?Let?s cross this year without paying penalty. We will think about the next four years? penalty later. The company has tools to offset the losses on account of penalty,? Rao said.
In the first five months of the current fiscal production is up 6.5% y-o-y to 163 mt after being flat in the last two years. The company has marginally raised its FY13 production target to 467 mt from 464 mt though no changes have been made in off-take target of 470 mt in FY13.
According to analysts, the good performance in the first five months was a sign that it would meet its FY13 targets.
