Fuel Supply Agreement (FSA) refers to an agreement made by a project company. Project companies are those that own and operate electricity generating facilities. The project company makes future contracts with the buyers for electricity, additional services or any other product available or generated by the Generating Station.
A draft for the Fuel Supply Agreement (FSA) was signed by the Coal India Limited (CIL) a year ago, which was not accepted by the National Thermal Power Corporation (NTPC) back then. NTPC did not sign the pact and had persuaded the government to ask CIL to make changes in FSA.
CIL and NTPC were meeting regularly to discuss this issue over the past few months and have now finally resolved it on Wednesday, June 26, 2013, when they finally agreed to sign the contract.
“At the board meeting on Wednesday, we have passed the fuel supply agreement. The board now has no issue with respect to fulfilling supply obligations of old units first at a thermal power station followed by meeting of scheduled supply quantity at the new units. Only after this, additional supplies will be eligible for incentive,” CIL chairman S Narsing Rao told the media after the meeting. The CIL board has also agreed to NTPC’s demand of adjusting volume of coal with energy content below 3,100 kilo calories per kg for calculation of incentives.
NTPC will sign 17 FSAs with CIL at present, which are for the units built after April 2009. Thereafter it will sign 12 more FSAs which are for the units set up with them in joint ventures with the third parties. CIL will be signing another 20 FSAs which are due, with other companies. It has signed around 64FSAs till date and 113 FSAs including those of NTPC are still left to be signed.
“The actual signing of the agreements is expected to start by middle of July as all of CIL subsidiaries will have to be notified and they will have to individually invite respective NTPC units to sign the agreements,” Rao said.
According to the FSA, CIL will have to supply around 80% of the committed coal delivery with a penalty clause on shortage of supply. “Thus CIL will be eligible for incentive only after it has supplied 90% of coal under the old format and then met 80% of the supplies under the new format in thermal power stations where both new and old units are operational,” said a senior NTPC executive.