By IANS,
New Delhi : State miner Coal India stands to lose over Rs.1,500 crore over five years if it signs fuel supply agreements (FSAs) with power companies, environment watchdog Greenpeace said Thursday.
Releasing a financial analysis on the impact of signing FSAs on Coal India ltd (CIL) ahead of a meeting Friday of the government’s coal and power secretaries to discuss the pacts, Greenpeace said private power producers are expected to benefit by getting guaranteed access to heavily subsidized coal.
It said CIL had earlier refused to sign binding FSAs on the grounds that it would not be able to produce sufficient coal to meet the requirements of all coal power plants coming on stream by 2015.
“A failure to supply coal could result in penalties of Rs.951 crore over the five year period (2013-17). If CIL were to divert coal that it currently sells via e-auction towards meeting its FSA requirements, the annual average income foregone could be as much as Rs.1,598 crore over the five-year period.”
The analysis was conducted by financial research firm, Equitorials, in the context of the presidential directive to CIL to sign FSAs with all power projects commissioned up to March 2015.
As per the directive, the coal major has to meet 80 percent of the annual contracted quantity (ACQ) with power utilities. CIL has said the 80 percent trigger level would be maintained with 65 percent domestic coal and 15 percent imported coal.
The CIL board has allowed the company to offer 15 percent imported coal as part of the FSA on a “cost-plus” basis. The cost-plus model provides imported coal at its actual cost.
According to Greenpeace, CIL is likely to face an annual average production shortfall of 82 million tonne over the period 2013-2017, and even assuming a 5 percent growth in production, the cost of importing coal to bridge the shortfall would be an estimated Rs.25,400 crore per annum.
“Bearing even a part of this cost would amount to a significant financial burden on CIL.”
“If CIL signs FSAs only for that quantity of power for which long term power purchasing agreements (PPAs) have been finalized based on competitive bidding tariffs, its financial burden could be significantly reduced,” Greenpeace said in a release.