Would govt force Coal India to sign fuel supply agreement?

The government is likely to take the final call in deciding Coal India’s fuel purchase agreement with private power producers as no consensus seems to appear among the board members.

CNBC-TV18 reports that government might mull presidential directive under Article 37 of memorandum of understanding of CIL. Under this directive, CIL must sign the agreement with private power producers, as its invocation makes it compulsory for the firm to comply.

Coal India will submit a report to the coal ministry on today’s meeting on Friday. After analysing the report, the ministry will take a final call on the FSA.

PTI however reports the board of directors of Coal India (CIL) today approved the new draft fuel supply pact, but with riders, according to a government official.

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“The board of directors of Coal India which met today cleared the clauses of draft FSA (fuel supply agreement) subject to certain conditions,” an official said.

[caption id=“attachment_260136” align=“alignleft” width=“380” caption=“Looking for fuel supply. Reuters”]  [/caption]

The official, however, refused to elaborate on riders.

“I cannot comment on the conditions,” the official said.

The Prime Minister’s Office (PMO) had last month directed Coal India (CIL) to ink FSAs with 80 percent supply clause before March-end for power plants that have been commissioned on or before 31 December 2011.

Earlier, independent directors in the board meeting held on 22 March had resented a clause in the FSA for ensuring at least 80 percent supply of the commitments to power plants.

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The board had also met earlier twice over the past one week, but no consensus could be reached as there were disagreements over some of the clauses in the FSA.

The independent directors, according to sources, had opposed to the clause for ensuring at least 80 percent supply of the commitments to the power plants stating that the PSU as facing problems in enhancing coal production and was not in a position to meet the commitment.

In today’s board meeting as well, independent directors have not agreed to the 80 percent trigger level under the FSA. All other conditions in the FSA have received consensus, reports CNBC TV18.

Amid power plants facing a supply crunch, the PMO had said that FSAs would be signed for full quantity of coal mentioned in the Letters of Assurance (LoAs) for a period of 20 years.

It had elaborated that if the supply remains below 80 percent, then CIL would be penalised and would be provided incentives if it was found above 90 percent.

In case, CIL is unable to meet the obligations, the company would have to arrange for fuel through imports or other arrangements, it had said.

With inputs from PTI