Power producers take on CIL over lopsided fuel supply pacts
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Monday, May 14, 2012
(economictimes.com)
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Company:
Power Sector
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Category :Power
Subcategory :Power
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NEW DELHI: Frustrated by uncertainty over fuel supply despite a presidential decree, top power generation firms have adopted a confrontational approach towards Coal India and decided to complain to the competition regulator against the state-run giant's "monopolistic" rejection of liabilities for default.
The power ministry is sympathetic to the concerns of private firms seeking fuel from the state monopoly and has sought the intervention of the prime minister's office (PMO) to quash Coal India's Fuel Supply Agreements (FSA). Power producers say the agreements are so heavily tilted in favour of Coal India that banks are refusing to fund projects that depend on such contracts for fuel, officials said.
CIL was forced to offer supply pacts to power producers after industrialists led by Ratan Tata and Anil Ambani sought the PMO's intervention to resolve the fuel scarcity. When Coal India's board did not approve new FSAs, the government issued a presidential decree, forcing it to sign the pacts, but the state monopoly offered diluted agreements, which guarded the monopoly from penalties if it defaulted.
A senior power ministry official said the ministry is against any alternations in the previous FSA as the Presidential decree only allowed changes in trigger level - the threshold level of coal supply to prevent penalties -- to 80% from 90%.
"FSAs are legal documents like power purchase agreements. When we cannot amend the documents without deliberations and requisite approvals, how can Coal India change the documents?" he said.
However, a top Coal India official said the FSAs were revised keeping in mind interest of the company and its shareholders as there is acute shortage of coal in the country.
Information Source:- http://economictimes.indiatimes.com/news/news-by-industry/indl-goods/svs/metals-mining/power-producers-take-on-cil-over-lopsided-fuel-supply-pacts/articleshow/13127249.cms
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