KOLKATA (miningweekly.com) – India’s largest coal miner, Coal India Limited (CIL), has loosened restrictions on its fuel supply agreements (FSAs) with provincial- and central government-owned thermal power companies.
The more flexible FSAs allow companies to swap coal allocated between power stations and will enable power generators to use feedstock as per efficiencies, plant load factor and geographical demand at each of the plant locations.
Hitherto, any thermal power companies with multiple plants across the country had to sign FSAs with CIL for each of the plants. Coal allocated for one plant could not be diverted to another.
In effect, multiple FSAs signed by a thermal power company for various plants will now be treated as a single FSA and will give power companies more freedom to allocate the aggregate coal entitlement from CIL, a senior government official said.
Although not explicitly stated by CIL, making FSAs more flexible for power companies had largely been made possible by surplus coal and large pithead stocks available with the miner, the official added.
Unofficial sources said that CIL had concluded FSAs that would require the miner to supply an estimated 402-million tons of coal to thermal power companies in the current financial year.
As of April 2017, CIL is carrying a pithead stock estimated at 69-million tons, while sales during the month grew by 6% even though production was down around 4%, according to published data.
However, according to an industry analyst, a more flexible FSA was also part of the miner’s marketing and sales push at a time when new renewable technologies are threatening coal demand in the country.
He pointed out that over the past two years, solar power generation in the country had jumped from 2 650 MW to 10 000 MW and, more significantly, solar power tariffs had fallen to levels of Rs2.62 a unit and lower than coal-based electricity. This is expected to have a negative impact on coal demand over the next few years.