Coal India, NTPC bury hatchet; to sign fresh supply pacts

Coal India Ltd will today sign new fuel supply agreements with the National Thermal Power Corp (NTPC) Ltd, its top buyer and the country's largest power producer, officials at the two companies said, ending months of disputes over fuel quality and payments.

"We are signing FSAs (fuel supply agreements) tomorrow (with NTPC)," Coal India chairman S Narsing Rao told reporters, adding about eight such deals for generating about 4,000 megawatts of power would be signed.

"We have already signed two for Farakka and Kahalgaon," he said, referring to the two plants in eastern India run by NTPC.

Rao said the fuel quality row was ''kind of sorted out''.

The two state-run bodies have been fighting since October 2012 over the quality of coal supplied from the Rajmahal mine of Eastern Coalfields (ECL), a subsidiary of CIL, in Jharkhand.

ECL supplies 14.5 million tonne annually to NTPC facilities at Farakka (2,100 MW) in West Bengal and Kahalgaon (1,340 MW) in Bihar from the Jharkhand mine.

The power producer has been complaining that while it is being supplied coal with a calorific value of 3,500 kilocalorie per kg, it is being billed for fuel of 4,500-5,000 kilocalorie.

The row had highlighted the difficulties India faces in extracting coal quickly and efficiently enough to eliminate power shortages and reduce its reliance on costlier imports.

ECL had this April threatened to halt coal supplies to these two plants after NTPC stopped paying the full price for shipments.

Currently the coal supplier and the power producer jointly monitor coal quality, opening up the possibility of wrangles over its true worth, but the government plans to change that by mandating a third party to judge value.

"There is some understanding between NTPC and us (as to) ... how do we solve this third-party evaluation and extrapolation into the period from when they started to reduce the payment," Rao said.

"Reduced payments affected us from October onwards."

The miner has Rs4,000 crore in outstanding dues with NTPC, Rao said.

Of the 492 million tonnes that CIL aims to supply in 2013-14, more than three quarters will be supplied to the power sector.