New coal supply pact to reduce theft, losses

New coal supply pact to reduce theft, losses
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First Published: Fri, Feb 02 2007. 12 48 AM IST
Updated: Fri, Feb 02 2007. 12 48 AM IST
NEW DELHI: To reduce coal pilferage, the government is drafting an agreement that will, for the first time, make the Indian Railways accountable for losses during transportation, which amount to Rs1,008 crore annually, and are borne entirely by power utility companies.
At present, such losses work out to Rs 1,008 crore every year and are borne entirely by power utility companies.
The contract will be a three-way agreement, involving Coal India Ltd’s subsidiaries, power generation companies and Indian Railways. Once in place, all the three companies will share out the fines, if either three parties fail to meet their contract commitments. The approach is expected to serve as a model for all coal supply agreements in the future.
Since Indian Railways transports coal at its client’s risk, the ensuing losses (estimated atRs800 to Rs900 per tonne of coal) during transportation are borne entirely by the power generation companies.
Coal accounts for over 50% of India’s commercial energy consumption and around 78% of domestic coal production is dedicated to power generation. For example NTPC Ltd., India’s largest power generation company, has total coal requirements of around 100 million tones per annum (MTPA).
The power generation sector has been complaining about receiving less than contracted quantities. Pilferage is happening during the transportationof coal as the quantities that are being loaded into the wagons are more than the capacities of the wagon.
“The problem gets compounded in the case of when it’s easier to steal coal from open wagons as it is easier to steal coal as compared withthe covered wagons,” said an executive of Coal India Ltd. The move, initiated by the prime minister’s energy co-ordination committee, has dubbed this as the fuel supply transport agreement (FSTA) —to be finalised in the next three months.
Confirming the development, a senior executive at Coal India Executive Ltd said, “The FSTA will be finalised shortly and aims to bring down the pilferages during the coal transportation. Out of the 280 million tonnes that gets transported every year to power generation companies, around 4% is lost due to pilferages.”
The Kirit Parikh’s Integrated Energy Policy, announced in August 2006, has asked for the current system of coal linkages to be replaced by long term coal supply agreements with strict penalties for not meeting contracted supplies, quality and off-take commitments. Industry analysts, who did not wish to be named, are of the opinion that such a step will hugely improve the coal supply scenario.
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First Published: Fri, Feb 02 2007. 12 48 AM IST