The fuel supply agreements to be signed by Coal India with power plants will now happen only after April 16.
The fuel supply agreements to be signed by Coal India with power plants will now happen only after April 16.
As per the government’s earlier directive, they had to be signed by March 31.
Coal India’s legal team is now vetting the draft FSA, which would be put up for board approval on Monday.
Among other things, the team is ensuring that the documents have been updated to reflect the new pricing norms based on its gross calorific value (GCV) system.
“The introduction of the GCV system was a paradigm shift for us in the way we value and grade quality of coal. The new FSAs should have to reflect that change. Otherwise, we would be getting into a whole lot of problems,” said a Coal India official.
Coal India last week created a comprehensive document detailing how every wording of the existing FSA document has to be changed to reflect the GCV system and sent it to each of its seven mining subsidiaries.
“All coal supply agreements (FSAs) are deemed to have been modified mutatis-mutandis and would be construed in conformity with the change from UHV to GCV system with effect from January 1, 2012,” reads a letter sent out to the subsidiaries by Coal India.
Comparing Coal India’s new GCV structure with the earlier system had initially befuddled coal consumers and experts alike as all this while it had been announcing prices loosely based on the useful heat value (UHV) method where the source of the mine also played a role, which sometimes led to wide variations in the prices of the same grade of coal.
The FSA documents have now been updated to reflect these and several other changes, said the official.
Under the new system, quality of coal measured in terms of gross calorific value has been made the sole criterion for price fixation with no importance given to their source while at the same time the grading system has been refined, raising the number of grades from 7 to 17.
To illustrate, the new FSA has described the hitherto undefined “ungrade coal” as one below GCV of less than 2200 Kcal/kg. The implication is that if Coal India supplies such coal to an FSA customer, the price would be just Re1 a tonne.
The system of sampling for determining the quality — always a contentious issue between Coal India and its customers — has also been changed. Collection of samples can now be done both manually as well as mechanically.
S Narsing Rao, Coal India’s chairman-cum-managing director designate, is likely to attend the April 16 meeting as a special invitee to the board to approve the draft FSA.
Rao, at present the head of Singareni Collieries Company, is joining as Coal India CMD formally in the next two weeks.
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