Under this agreement, SECL will supply coal to Daewoo Power for 30 years at 4.5 million tonne per annum or a minimum of 10,555 tonne per day.

The Union government has granted coal supply linkage to 21 independent power projects (IPPs) which will consume over 29 million tonne of coal for a generation capacity of 15,367mw. The Daewoo power project is one of those 21 IPPs.

"In view of the balanced structure of the agreement, response of other IPPs to the features of this agreement is very encouraging. They are showing eagerness to accept this agreement as a model with minor changes to suit their specific requirements," the official said.

Daewoo Power has already signed power purchase agreement with the Madhya Pradesh State ElectricityBoard (MPSEB). It is expected to sign the escrow agreement with MPSEB shortly.

The official said both sides finalised the negotiations on the agreement in only five months. This could be possible through constructive appreciation of each other's concerns.

Another three to four IPPs have either completed their coal supply agreements or are in the final stages of concluding them as all the commercial issues have already been sorted out with the respective coal companies.

Wherever coal-rail interface exists, the power projects are negotiating the fuel transport agreements with the railways separately.

The coal supply agreement between SECL and Daewoo Power has a term of 30 years from its effective date. It provides for delivery of coal by SECL by road at the receiving yard of Daewoo Power near Kushmunda railway siding.This receiving yard shall have a minimum stacking capacity of 2,59,000 tonne of coal and Daewoo Power shall be obliged to receive coal as long as the stocks at this yard are less than2,59,000 tonne.

If SECL fails to deliver the minimum quantity agreed upon in any month, Daewoo Power shall have the right to procure the balance from other sources and SECL shall be liable to pay the difference in price on such quantity of coal obtained from other sources to make up for the shortfall up to the minimum quantity agreed upon.

SECL shall also have to pay the differential provided the stock at the yard is reduced to below one day's contract quantity.

The damages payable by SECL is subject to a ceiling of 200 per cent of the price of coal not delivered. Considering the risks of the seller, Daewoo shall pay a risk premium of 2.5 per cent of the base price of coal to SECL.If Daewoo Power fails to accept the cumulative required quantity of coal, it shall have to pay SECL damages amounting to 7.5 per cent of the base price for failed quantity between 10 to 20 per cent of the cumulative required quantity and 50 per cent of the base price for any failed quantity which is above 20 per cent of thecumulative required quantity.

According to the provisions of the agreement, SECL shall earn quantity bonus for quantity performance and quality incentive for supplying better quality coal. However, should SECL fail to maintain quality, it shall have to pay quality rebate for slippage from the agreed level. Coal supplies will be sampled through automatic coal samplers and analysed jointly at the loading end. However, coal will be supplied against full advance cover and SECL shall be entitled to suspend its supply obligation in case of default in payment by Daewoo Power.