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CIL, NTPC to go for arbitration over coal quality

Coal India Ltd (CIL) and NTPC are exploring ways to go for arbitration for settlement of dispute over under-payment for coal supplied due to poor quality.

Both producer of the fuel, CIL and its key customer, NTPC, had gone for third-party sampling of the coal to be supplied in a bid to settle the dispute over allegation of poor quality.

And after the data from the third party exercise till March are collated and analysed, the parties may go for arbitration for settlement of the dispute over how much NTPC would be paying CIL finally.

"There is a provision for resolving this dispute using government's arbitration mechanism. Once we are ready with the numbers we may put it before this mechanism, and after hearing both sides, the issue will get resolved," S Narsing Rao, chairman and managing director of CIL, said.

And, since data from sampling undertaken till March would be studied before doing for arbitration, the dispute is unlikely to get resolved before the end of current fiscal.

"We will use the numbers generated by March 31. So the resolution could happen only after that. But if by March-end, the numbers are clearly visible we may have to go for provisioning during the third quarter," Rao has told analysts.

The issue over supplies from October 2012 to September 2013.

"We are trying to resolve the past problem where coal was supplied at a particular level but they claim it was at a lower level. In order to overcome the problem once and for all, the agreement was that for three to six months we would observe the comparable like-to-like samples and extrapolate to the past. If there is a variation it would be adjusted."

The dispute between CIL and NTPC mostly relates to coal supplied from the Rajmahal coal mine of Eastern Coalfields Ltd (ECL), a CIL subsidiary.

ECL supplies 14.5 million tonne annually to NTPC's 2,100 mw Farakka plant and 1,320 mw unit in Kahalgaon. CIL shifted to a new pricing mechanism based on Gross Calorific Value in 2012. NTPC then complained that while it is being supplied coal having a calorific value of 3,500 kilocalorie per kg, it was being billed for fuel of 4,500 kilocalorie per kg to 5,000 kilocalorie.

Source: DNA