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CIL approves revised fuel supply pact

* No penalty should be levied for 3 years,says CIL Board

Written by Priyadarshi Siddhanta | New Delhi | Published: April 17, 2012 1:01:02 am

In a hurried move to implement the Presidential decree issued by the government to ensure adequate long-term coal supply to power firms,Coal India Limited (CIL) today approved the revised Fuel Supply Agreement (FSA) to be executed with at least 48 companies for generating 18,522 Megawatt of electricity.

“The CIL Board which met this evening,approved the revised FSA mechanism,which mandates the company to supply at least 80 per cent of the requirement of each company. The FSA document will now be circulated to its subsidiaries,who will have to execute the FSAs. CIL will ink FSAs with 48 power companies to help them generate 18,522 MW implying that CIL will have to annually supply an additional 54 million tonne,” a coal ministry official told The Indian Express.

The directive,issued by the government recently,also states that CIL might have to pay penalties if it fails to ensure 80 per cent of its fuel-supply commitment to power firms.

The CIL Board,however,decided that no penalty should be levied against the maharatna for at least three years. After three years if the PSU defaults then .01 per cent of the price of per tonne of coal prevalent at that time can be realised as penalty from the company.

“(CIL) will have to shoulder huge commitments in supplying coal and there could be unforeseen difficulties in executing the FSAs… why should the PSU be penalised for it,” the official said.

For the past one week,board members of the firm has been constantly interacting with the coal ministry officials on “devising acceptable ways” in implementing the decree,which has come after the company failed to honour the March 31 deadline set by the Prime Minister’s Office in executing FSAs.

The Board of the maharatna,which has been suffering from production and supply constraints,is also understood to have favoured diverting coal meant for e-auctioning to the power sector to avoid being a defaulter.

But with little over 1 per cent growth at 435.84 million tonne in production in 2011-2012,CIL may have to resort to imports to bridge any possible deficit in case a demand supply crisis arises.

Fast-track mode

* The government recently issued a presidential decree asking Coal India to guarantee long-term fuel supply to power firms

* The revised Fuel Supply Agreement will be executed with 48 power companies for generating 18,522 Megawatt of electricity

* The Board of Coal India Limited has also favoured diverting coal meant for e-auctioning to the power sector to avoid being a defaulter

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