Impasse breaks as NTPC, Coal India okay FSA

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Coal India has finally approved the Fuel Supply Agreement (FSA) to be signed with NTPC, its biggest customer, bringing to an end a long-drawn tussle between the two state-owned companies over the contours of the pact.

NTPC’s board had approved the final draft of the agreement on Tuesday, and on Wednesday, the draft was taken up by Coal India’s board, which okayed two contentious issues on which consensus was elusive.

“We are in a position to sign the FSA tomorrow,” Coal India chairman Narsing Rao said after the board meeting. “It will (now) go to our subsidiaries, who will then sign. Maybe in another two weeks, NTPC will sign.”

One of the two contentious issues was how to treat coal of gross calorific value (GCV) below 3100.

Before the introduction of the GCV system, NTPC was accepting coal up to a minimum quality of 3100 kilo calorie.

Coal India now has several grades of coal even below 3100 kcal, which NTPC has agreed to accept.

But it had set a condition that it will pay incentive only to the extent of 25% of supplies of that quality above the trigger level.

Under the FSA, Coal India can charge incentive for supplies above a trigger level of 80% of a plant’s total coal requirement.

The second contentious issue was supplies to old and new power generating units within the same plant premises, having FSAs with different trigger levels.

“We have clarified that we are fine. Only after fulfilling 90% trigger level for the old one and 80% to the new one will we claim the incentive,” said Rao.

NTPC now needs to sign FSA for about 9,000 mw, which its chairman Arup Roy Choudhury said on Wednesday would be done as soon as Coal India’s board clears the pact.

Coal India’s board also decided to repay some of its foreign currency on a day the rupee breached the 60 mark against the dollar.

“We are prepaying to Japan Bank for International Cooperation loan of about Rs 300-400 crore due to forex fluctuations,” said Rao.

To be sure, Coal India also had loans from institutions like International Bank for Reconstruction and Development and Export Development Corp of Canada, aggregating Rs 1,333 crore, as of March 2012.

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