KOLKATA - India’s largest coal miner Coal India Friday inked a much-awaited fuel supply agreement (FSA) with power generation major NTPC Ltd.

In the agreement both sides have settled for a ‘trigger level’ of 90 percent. Trigger level is the minimum assured level of coal supply and offtake, failing which either of the parties will attract penalty.

Earlier Coal India had insisted on a trigger level of 75 percent, but NTPC had asked for 90 percent.

The FSA signed here is the first between Coal India and any power utility and would serve as the model for all subsequent agreements between coal companies and power agencies, Coal India chairman Partha Bhattacharyya said.

“We will now sign such pacts with state power utilities and other power companies,” he told reporters.

As per the new coal distribution policy (NCDP) of the central government, coal companies are required to supply the black gold to consumers through legally enforceable FSAs with performance-based ‘take or pay’ provision.

Out of its 1,222 valid consumers, Coal India has formulated FSAs with 1,167, but so far it had not entered into any such pact with any power utility.

More than 75 percent of Coal India’s production is lapped up by power utilities.

The Central Electricity Authority (CEA), which played a pivotal role in formulating the FSA, has developed an all India coal supply matrix for all 78 power stations in which Coal India will supply a total aggregate annual contracted quantity (ACQ) of 306 million tonnes, Bhattacharyya said.

The tenure of the FSA with power utilities will be a maximum of 20 years or till the end of the life of the power station, whichever is earlier. However, there are provisions for a joint review of the ACQ after five years.

The coal company will get a bonus if it can supply more than the trigger level of 90 percent of the ACQ, but will have to shell out a penalty to the power agency if the supply falls below the trigger level.

Similarly, the power utilities will be eligible for a bonus if they can lift more than the trigger level of 90 percent of the ACQ, but pay a compensation in case the lifted quantity falls below the trigger level.

NTPC chairman R.S. Sharma was also present at the media meet.