Coal India ordered to sign fuel supply pact with power firms

By IANS,

New Delhi : The government Tuesday ordered Coal India to sign fuel supply agreements (FSAs) with power producers committing at least 80 percent assured supply.


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A presidential directive issued to this effect will greatly benefit power projects that have been commissioned on or before December 31, 2011 but are not getting sufficient raw material and operating far below their potential.

Coal Minister Sriprakash Jaiswal said Coal India, in which the government holds the majority stake, will sign the FSAs with power companies within 24-48 hours (by Thursday).

In February, the Prime Minister’s Office had directed Coal India to sign FSAs after a high-level meeting with a delegation comprising chiefs of the country’s most powerful companies, including Tata Sons Chairman Ratan Tata and Anil Dhirubhai Ambani Group Chairman Anil Ambani, in January.

The independent directors of Coal India last week approved the FSAs but reportedly opposed to the clause for ensuring at least 80 percent supply of the commitments to the power plants saying that the firm was facing problems in enhancing coal production and was not in a position to meet the commitment.

The world’s largest coal producer Tuesday said its output grew by one percent to 435.84 million tonnes in the fiscal ended March 31, 2012. The company said it was targeting the output to reach 470 million tonnes in the current financial year.

The government’s move had upset the company’s second largest investor, The Children’s Investment Fund.

The London-based TCI has threatened legal action against the board for pricing coal at 70 percent discount to market prices in breach of what it calls “failure of fiduciary duty under pressure from the government” to maximise value for shareholders.

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