Coal India to take tough call on FSA

PRIYADARSHI SIDDHANTA

Under intense pressure from a presidential decree, the Board of Coal India Limited (CIL) will have to take a tough call when it meets next week on the quantum of Fuel Supply Agreements (FSA) to be executed, failing which it may have to shell out a huge penalty.

The top brass of the company is already struggling to assess the impact of the decree, which was issued after its failure to honour the March 31 deadline set by the PMO on executing the FSAs.

The decree mandates CIL to execute FSAs with power producers assuring them of up to 80 per cent of fuel delivery.

Even as chairman-designate S Narsing Rao is yet to take charge, the Board under the chairmanship of Zohra Chatterji conducted extensive in-house deliberations and inter-ministerial consultations in the last few weeks “to somehow adhere to the presidential decree.” Sources said, Rao is unlikely to take charge next week.

The CIL management has hurriedly vetted a draft FSA and is preparing the final version on a war footing.

“We are aware of the implications of the presidential decree. We shall try to execute the FSAs matching our resources. We need to assess how much we should import to bridge the demand-supply gap,” Narsing Rao, who is current chairman of the Sinagreni Collieries Company told The Indian Express over the phone from Hyderabad. A source in the CIL said the PSU is likely to execute FSAs for over 25,000 MW capacity.

While the coal ministry’s assessed demand for the fuel in 2011-12 is 696 MT, the targeted domestic production is 554 MT leaving a gap of 142 MT mostly to be met through imports.

Land acquisition issues, relief and rehabilitation constraints and difficult system of securing green clearances have wreaked havoc on CIL’s production abilities. The power ministry has told the PMO that short supply of coal has resulted in output losses of various utilities to the tune of 10.9 billion units (BU) in 2008-09, 14.5 BUs in 2009-10 and 7 BUs in 2010-11. During April-November 2011, coal-based power generation was 370.8 BUs against a target of 375.1 BUs, Coal imports have been steadily rising and during April-November 2011, 19.8 MT coal was imported. In addition, 10.6 MT was to be sourced from abroad by the utilities themselves. Nearly 30.4 MT coal has been imported up to November 2011.

However, sources within the coal ministry and the CIL do not find issuance of the decree to be a “reasonable exercise.” Sources say that in case the firm decides to import to bridge the demand-supply gap, to what extent would the companies be willing to foot the bill is also uncertain. Imports has become costlier as coal exporting nations like Indonesia and Australia have imposed taxes on shipping out the mineral.

“One should appreciate its (CIL’s) constraints, which cannot be wished away,” a ministry official said.

Source: Indian Express