India's union Coal Ministry has asked the coal suppliers to deliver the fuel only on the basis of the memorandum of understanding (MoU) until the pending issues relating to the fuel supply agreement (FSA) are resolved by the parties.
"The Ministry of Coal has issued a directive to coal companies to supply coal to power plants commissioned till March 31, as well as those to be commissioned during 2012-13 through the MoU route as the FSAs are getting delayed," according to an official statement.
The move will help 8,800 MW of electricity generation capacity that has been installed in the first three months of 2012. It will bring relief to a large number of areas that was facing shortage of power. Some of the power companies in the country are objecting a fuel supply deal proposed by Coal India (CIL) mainly due to the penalty clause.
CIL has entered into the fuel supply agreement with 13 power units including Reliance Power's Rosa Power project. However, some firms are opposing the penalty clause in the agreement and have not signed the agreement with the company.
Central Electricity Authority (CEA) has approached the PMO for intervention over the opposition of some power units to the clause included in the fuel supply agreements (FSAs). The differences are over penalty that is to be paid by the coal major if it fails to supply 80 per cent of the contracted fuel to them. NTPC is among the companies that have refused to sign FSAs.
The FSA includes clauses that say that power units will see their supply terminated if they divert coal for other uses. It also includes penalty of 0.01 per cent in case the unit does not comply with the agreement terms and conditions.