With 146 fuel supply pacts in place, 65,000 MW to go on tap

Business

Over the last three months, a success story has been quietly scripted on the single-biggest impediment facing the country's power sector — the absence of firm coal supply agreements for a majority of the country thermal power projects.

State-owned Coal India Ltd (CIL) has been forced into inking fuel supply agreements (FSA) with a total of 146 new power projects so far, totalling a cumulative capacity of over 65,000 MW, within touching distance of the 78,000 MW fuel pact target set under a PMO-led initiative early last year.

With agreements already in place for projects commissioned before March 2009, the impetus in the FSA signing initiative over the last few of months means firm fuel linkages for all power stations that are either operational till now, or projects slated to come on stream by 2015. The 78,000 MW target entailed a total of 173 power pacts, which means less than 30 more pacts to go in the coming weeks.

The success in pushing through the fuel pacts has largely been possible with the power ministry hammering out a consensus with the coal ministry and CIL on the three contentious issues that have held up these agreements so far: a commitment on the annual contracted quantity of coal, penalty for lower supplies and the vexed issue of third party sampling.

In addition, two key decisions over the last couple of months have added to the renewed sense of purpose in the power sector.

The first is the decision of the Cabinet Committee on Economic Affairs in July that approved a pass through mechanism for compensating for the higher cost of imported coal for private power projects.

The second is a decision by an Empowered Group of Ministers clearing the amendments to the standard bidding documents for new thermal power plants offered under the tariff based competitive bidding route (Case II projects).

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