Coal truths
Power producers have reasons to be peeved over the terms of the fuel supply agreements (FSA) that they are now inking with Coal India Ltd (CIL). These are heavily loaded in the latter's favour. The FSAs commit CIL to supply at least 80 per cent of the total contracted quantity of coal. But the penalty – dreamed up by CIL itself – in the event of delivery shortfalls is so tiny, at 0.01 per cent, that it, in fact, incentivises default. Assuming the FSAs to cover 200 million tonnes (mt) and taking an average coal price of Rs 1,500 a tonne, a 0.01 per cent fine even in case of not a single tonne being supplied works out to just Rs 3 crore.