Coal India board okays new fuel supply agreement model

September 1st, 2012 - 12:18 am ICT by IANS  

Kolkata, Aug 31 (IANS) The board of state-run Coal India Ltd (CIL) has cleared the cost plus model for fuel supply agreements (FSAs) with power firms but asked the coal major’s management to come up with a business model for price pooling mechanism soon, a top official said Friday.

“The board has asked us to propose a business model on price pooling. However, FSA is more or less cleared. It is different from price pooling,” CIL chairman S. Narsing Rao told media persons after an eight-hour-long board meeting here.

The cost plus model provides imported coal at its actual cost. The board has not given the CIL any time frame for submitting the new business model before it.

“Price pooling is mechanism to implement the FSA. Suppose there is no price pooling, FSA will be like 65 percent domestic coal and 15 percent imported provided the power producers are willing to take it. Suppose if pooling price is approved, then the 15 percent would be at pooled price, not at the cost price,” Rao explained.

According to the chairman, the new business model would deal with the impact of taxation on coal imports, price of coal and legal implications of pooling mechanism.

As per the presidential directive, the CIL has to meet 80 percent trigger level.

The coal major in its last board meeting had agreed to pay penalty of 1.5 percent to 40 percent on failing to supply the committed quantity of coal to the power utilities, following protests from major companies over its decision to go for a paltry penalty of 0.01 percent.

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