In such a worrisome background, the concurrence of ministry of coal to the proposal of the Coal India Limited (CIL) to gradually do away with the fuel supply agreement (FSA) and its substitution by letter of assurance (LoA) which has already been under implementation questions the sagacity of coal ministry and the minister Sriprakash Jaiswal. Presently, coal supply assured to power plants through this route is nearly half of the normative quantity indicated by the Standing Linkage Committee although the LoA target is 90 per cent. Worst of all, the views of power ministry were not considered before embarking on the LoA experimentation. Actually, it opposed this change in coal distribution policy of CIL which meets 80 p.c. of coal requirements of thermal power stations (TPS) and super thermal power plants (STPS). Sadly enough, thermal power plants are left with the sole option to get 50 p.c. of their coal requirement through import or e-auction route which meets 10 p.c. of CIL supplies.

Several senior executives in the sales and marketing of CIL subsidiaries, refusing to be fanatically committed to their corporate overlords are unhappy. During the last two years, no FSA was entered into between CIL or its subsidiaries and the thermal power projects. “CIL supplies fuel to these plants even without FSA, but is under no compulsion to maintain a minimum supply throughout the year”, a senior deputy general manager of a CIL subsidiary admitted informally.

According to CIL, it will supply 343.5 MT of coal to the power utilities during 2011-12, of which 306 MT is already committed for the units commissioned till March 31, 2009 under FSA. Thus, additional availability of coal for newly commissioned units during 2009-12 will be only 37.5 MT, meaning a shortfall of 30 MT coal for the power sector. As per the New Coal Distribution Policy (NCDP) of coal ministry, coal companies issue LoA for new projects for which they demand commitment guarantee - LoA getting converted into FSA, subject to accomplishment of certain milestones within a specified time frame. But the supplier does not furnish any counter guarantee unlike under FSA. This imposes a risk factor as sampling without Automatic Mechanical Sampler in lieu of joint inspection at loading point does not lead to precise determination of quality, nor does this ensure supply of assured quantity, alleges coal consumers.

The coal ministry adopts a fire brigade approach. It has been allotting coals in adhoc quantities on yearly basis to power utilities to prevent total disruption of supplies, a compulsion under a memorandum of understanding signed between the power Utilities and supplying coal companies. But there is no standard format for such MoUs — adhocism in spirit too. For instance Farakka and Kahalgaon Units of NTPC, Mejia Unit of DVC and Budge Budge Unit of CESC were issued 2.68 MT, 0.97 MT and 0.32 MT respectively for the year 2011-12 through the Eastern Coalfields Limited, a CIL subsidiary. Those STPPs allege that the ECL pooh-poohs repeated reminders during the five months for entering into MoU. The boot lies on the foot of concerned director (technical/operations).

As per the CEA, as on 23 October this year, out of 89 power utilities, 48 are in a critical state or less than seven days’ stock while 30 of them are super-critical (less than four days’ stock). Some even have one day’s or no stock at all. Among the zero stock power units are 2000 MW Singrauli STPS in UP, 3260 MW Vindhyachal STPS in MP, 500 MW Koderma PS in Jharkhand and 2340 MW Mejia TPS and 500 MW Durgapur TPS in West Bengal and with just one day’s stock are 1050 MW Bakreswar TPS, 1260 MW Kolaghat TPS and 1500 MW Sagardighi TPS in W Bengal, 1800 MW Sterlite station in Orissa, 1800 MW Simhadri TPS in Andhra Pradesh,1372 MW Obra TPS in Orissa, 500 MW Chhabra TPS in Rajasthan and 1360 MW Panipat TPS in Haryana.

The NCDP has clamped a mandate to the CIL to meet the entire demand of power utilities under the FSA even by import of coal if feasible. But the latter wants this diktat to be suitably modified in view of its limited ability. As on April 30, 2011, the CIL signed 1,599 fuel supply agreements with various firms for 391 MT of coal supply.

Top officials in power utilities in tune with the power ministry are for continuance of FSA and critical of imposition of LoA. The ball is in the court of coal minister. Nearly 80 per cent of coal offtake from Coal India is in the power sector, and the fertilizer industry hardly consumes one per cent of total offtake. In June, the Planning Commission had asked the CIL to sign pacts with power companies to ensure sufficient supply of dry fuel even if the coal miner has to import it as the companies facing coal shortages found their projects became 'unfinanciable'. The coal ministry doesn’t seem serious enough to consider the suggestion. (IPA Service)