Coal India Ltd (CIL) has agreed to sign Fuel Supply Agreement (FSA) with power producer companies to supply a minimum assured coal required for power generation. The FSA is a guarantee pact, which will ensure that India’s largest coal producer supplies around 80% of coal required by the power firms. The decision to sign FSA was taken after Coal India’s board met in Kolkata on Monday.
"The board agreed upon the Fuel Supply Agreement document and it will be signed within 15 days from the date of government directive," said Zohra Chaterji, acting chairperson and managing director, CIL.
The government, CIL’s largest shareholder with a 90% stake, had on April 3 issued a directive to CIL to commit to a supply of minimum 80% of fuel along with a penalty clause. The directive was issued following a meeting between power sector honchos and the PMO.
“For the penalty clause, we have decided to keep it at a minimum and it would be operational after three years,” Chatterji said. CIL would pay a penalty of an average of 0.01% of shortfalls in coal supplies.
Of late, power sector firms have been concerned about acute coal shortage that could adversely affect power production. Around 75% of India’s power comes from coal-based thermal power plants that require close to 550 million tonnes coal in a year. However, total coal produced in India that includes coal produced by CIL and other captive mines is only 480 million tonnes. This leaves a shortfall of 70 million tonnes to be met through coal imports.
Chaterji did not specify the exact quantum of coal to be imported by CIL and only said “…it will be decided later”.
UK investor The Children's Investment Fund, which owns 1% of Coal India, has threatened legal action against the company for not protecting the interests of minority shareholders.