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JUN 23 2012

PMO review: Coal India to supply 65% of contract in first year

  • Economic Times, ET Bureau / Hyderabad
  • Created: Sat 23rd JUN 2012

The Prime Minister’s Office (PMO) on Friday asked Coal India Ltd (CIL) to import coal to meet the shortfall.

The PMO is understood to have agreed to the new supply model proposed by CIL wherein supplies would start from 65 per cent in the first year of signing the fuel supply agreement (FSA) and go up to 80 per cent in the fifth year.

But the public sector miner will to have to pay higher penalty if supplies fall beyond the contracted volumes and not just 0.01 per cent, as decided in the current FSAs.

“We will be approaching the Coal India board. They will take the final decision. Demand has to be looked in many ways – whether you are going to supply on annual contracted supply or going to supply at trigger value, which can be 65-80 (per cent). All these things have to be worked out,” the Coal Secretary, Mr S. K Srivastava, told reporters after the PMO review meeting.

According to estimates, Coal India may fall short of nearly 45 million tonnes annually. To meet this gap, it may have to import 30 million tonnes. The Coal Ministry and Coal India are exploring the option of MMTC or STC acting as nodal agency and import on behalf of Coal India.

Coal India has proposed to supply 65 per cent of the fuel demand for the first three years after the signing of FSA. The miner would supply 72 per cent of the demand in the fourth year and 80 per cent in the fifth year.

“All issues regarding FSAs, coal block auction policy and de-allocation, among others, have been discussed. This is a continuous process. We have not taken a final call on many issues,” he said.


An inter-ministerial panel will review de-allocation of 58 coal mines, Mr Srivastava said. The panel is to be headed by the Additional Secretary of Coal Ministry, Ms Zohra Chatterji, with representatives from the Ministries of Power, Steel and DIPP, Finance, Law; and Chairman of CMPDIL.

Private power producers, however, are not in favour of the development. “Sixty five per cent of the 85 per cent supply committed under Letters of Assurance (LoAs) would imply plant load factor of 55 per cent, which is far below the normative availability factor of 85 per cent,” said Mr Ashok Khurana, Director General of Association of Power Producers (APP).

He said if this measure is not accompanied by bulk coal imports to meet the deficit for normative availability, price pooling and across-the-board tariff revisions to reflect blended fuel price, the outcome would be disastrous for the power sector.


Finance Independent Power Producers Coal Coal India Limited PMO Fuel Supply Agreement CIL Power

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