In an apparent move to shrug off surging criticism of policy paralysis that has gripped governance in the country, India’s largest coal producer Coal India Ltd has agreed to sign pacts for supply of fuel to power projects by March end, but only after Prime Minister Manmohan Singh stepped in to dissipate the crisis.
Coal India will now provide full quantity of coal required by power plants that have been commissioned up to December 31,2011. The agreements to that effect would be signed by March-end and is an outcome of the meeting of committee of secretaries (CoS) constituted by the Prime Minister to look into issues impacting the power sector. The meeting was held on February 1.
Coal India will also sign fuel supply agreements (FSAs) with power plants that have entered into long-term power purchase agreements (PPAs) and have been commissioned or would get commissioned on or before March 31, 2015.
“The FSAs will be signed for full quantity of coal mentioned in the letters of assurance (LoAs) for a period of 20 years with trigger level of 80% for levy of disincentive and 90% for levy of incentive,” the Prime Minister's Office said in a statement."In case of any shortfall in fulfilling its commitment under the FSAs from its own production, Coal India Ltd will arrange for supply of coal through imports or through arrangement with State/Central PSUs, who have been allotted coal blocks. The proposed course of action has been approved by the Prime Minister."
CIL and various power producers have been at loggerheads over the issue of supply of coal, a critical raw material in the production of thermal power. Power producers had alleged to the Prime Minister on January 18, that Coal India was insisting on signing fuel supply agreements with assurance of only 50% supply of the required quantity of coal, that has resulted in no new FSA being singed since April 2009.
The new arrangement would provide relief to power plants with an estimated capacity of over 50,000 megawatt.