NEW DELHI, Nov 2: The union coal ministry has made a breakthrough in its negotiations with the Hinduja National Power Company Limited (HNPCL), ending a stalemate over the power producer's fuel-supply pact with the public sector Coal India Limited (CIL).

Ministry sources said a high-level meeting had ironed out some of the most nagging hitches in the fuel-supply pact, paving the way for a formal agreement by the end of this month.

The top brass of Coal India Ltd (CIL), its subsidiary the Mahanadi Coalfields Limited (MCL) and the ministries of power and coal were also present in the meeting.

Coal ministry sources said ``some of the fundamental issues'' that had held up the long-pending fuel supply agreement were sorted out during the confabulations on October 24.

They pointed out that the key tenets of the coal supply and transportation agreement (CSTA) had already been approved, first by a committee of secretaries and then the union cabinet, early this year, but minor hitches remained. Mahanadi Coalfields managing director RK Sharma said, ``there was some understanding on most issues,'' adding that he would not be able to comment till Hinduja Power had submitted the draft of the agreement.

Lawyers for the coal supplier and Hinduja Power are now working on a draft agreement, that will be scrutinised by the power and coal ministries at a subsequent meeting by the middle of this month. The approval of the draft by union ministries of coal and power, will enable Hinduja Power and MCL to put a formal seal to the agreement, that has now been pending for a couple of years.

Hinduja National Power Company, that is setting up a 1040 mw fast-track thermal power plant in Visakhapatnam, accepted the coal ministry suggestion that compensation for short supplies be computed in terms of tonnes of coal and not the subsequent impact on the plant load factor (PLF) of the power plant.

Mahanadi Coalfields Ltd is committed to supply 4.8 million tonnes of coal to Hinduja Power every year. Should short supplies hamper power generation below a plant load factor (PLF) of 68.5 per cent, MCL will have to pay damages to Hinduja Power.

The coal company had suggested that the damages be calculated in terms of the tonnage of coal in short supply, but Hinduja Power demanded that the damages be computed on the basis of the PLF that was lost. The power producer has now accepted the tonnage of coal as a basis for calculating damages. Hinduja Power has also agreed to weed out terms that could compel the coal supplier to pay damages for circumstances beyond its control. The union cabinet had specified that force majeure conditions could not be imposed on the coal supplier.

Industry sources say some of the terms being demanded by Hinduja Power, would in effect, tantamount to the coal company paying damages for situations beyond its control. Hinduja Power had for instance, demanded that Coal India make ``best efforts'' to meet its coal supply commitment, an expression that left scope for a quarrel over what Coal India's best efforts had been during unforeseen circumstances, like a natural calamity for instance.

The power purchase agreement (PPA) between Hinduja Power and the Andhra Pradesh State Electricity Board (APSEB) and the subsequent letter of comfort by the centre (now that a counter-guarantee has been denied to the project) have been pending, because of the differences between Coal India's and Hinduja Power over the fuel-supply pact.

Hinduja Power coal supply and transportation agreement will set the tone for all similar contracts between power producers and coal suppliers, sources said.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.