NEW DELHI, May 22: The ongoing fuel supply wrangle between Coal India Ltd (CIL) and Hinduja National Power Corporation Ltd (HNPCL) will come up before the Cabinet high-power board on Friday.

The power producer refused to sign on the dotted line even after the union cabinet approved the tenets of the fuel supply agreement in March, as some of the terms decided on at that meeting were not in tune with what it had demanded. The agreement will serve as a model for all subsequent fuel supply contracts between power and coal producers.

The meeting will actually review the progress of the counter-guarantees granted to the independent power producers (IPPs.) The Hindujas' quarrel with the fuel supply terms imposed on them in the model agreement, would also be ironed out at the secretary-level meeting, according to high-level sources in government.

Hindujas demanded that some of the conditions they had originally sought be included in the contract, at a meeting with the coal ministry earlier this month. The power company wants to incorporate force majeure conditions, or events beyond the control of the coal producer or the railways, into the supply agreement.

The cabinet had definitely turned down the proposal, as it was not in tune with international norms. A force majeure clause in the contract would make the fuel supplier liable to pay damages for supply disruptions because of natural calamities or `acts of God'.

The cabinet also only made the power producer liable for damages if slippages in coal supply resulted in generation dropping below a plant load factor (PLF) of 68.5 per cent. Hinduja National Power wants Coal India to bear the fuel risk, whether or not the plant load factor drops below 68.5 per cent.

Losses of fuel in transit, according to the cabinet decision, should be borne either by the power producer, Hinduja National Power or the power purchaser, which in this case will be the Andhra Pradesh State Electricity Board (APSEB). The Hindujas, however, would prefer Coal India to pay for the losses of fuel in transit.

Coal India's fuel supply agreement with the 1040 mw fast track power project in Andhra Pradesh has been altered four times, since the coal ministry approved a fuel linkage for it more than a year ago. The contract for supplying 4.8 million tonne of coal annually from Coal India's Mahanadi Coalfields, was initially to have been signed by the coal company.

Later the Railways were made a party to the agreement and Hinduja National Power agreed to sign two separate contracts.

The cabinet gave its nod to the Hinduja demand that it be allowed to sign a single agreement with Coal India subsidiary, Mahanadi Coalfields Ltd.

The agreement provides that Coal India take on the damages for supply slippages. A committee within the government would then determine the extent to which the coal company and the Railways should shoulder the burden of the fuel risk.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.