Warning that Coal India Ltd. (CIL) should not ignore the mandate of the April 4 Presidential directive to protect the commercial interests of the company, CIL independent directors have warned the Coal Ministry and CIL that the proposal of the Central Electricity Authority (CEA) would benefit only the independent power producers (IPPs) at the cost of public money.
In a dissenting note to CIL and forwarded to the Coal Ministry, the independent directors have asked the official directors of the company to re-consider their stand in view of the grave legal, commercial, economic and ethical problems arising out of their supporting the CEA views.
The CEA had mooted a proposal which required CIL to import around 20 million tonnes of coal in 2012-13 and supply the same at a subsidised price (nearly half of the cost price) to IPPs, resulting in a loss of Rs.3,000 crore annuallyto the company.
Spread over 20 years, the anticipated loss to CIL would be around Rs.60,000 crore.
The CEA had also proposed that the losses might be made good by increasing the prices of indigenous coal to about Rs.100 a tonne for all power producers.
“The CEA itself provides for passing through of the increased coal price to power consumers.
“Ultimately, the increase in cost is to be borne by the domestic consumers while the IPPs will get subsidised imported coal at half the cost,’’ the note states.
Further more, the note states that the decisions of CIL in finalising the terms of the fuel supply agreements (FSAs), including the trigger point at 80 per cent of annual contracted quantity (ACQ) and the rate of penalty at 0.01 per cent taken on April 16, were a result of wide and deep deliberations carried out at several meetings of the CIL board this year in pursuance of the April 4 Presidential directive.
“These decisions have already been implemented in the case of 29 private power producers, ’’ the note states.
It states that no arrangement has been made by the CIL management to protect the company or its directors against allegations and proceedings likely to come up by deviating from the Presidential directive. The note states that the new dispensations entail lowering the trigger points from 80 per cent of ACQ to 65 per cent but also seek to levy penalty ranging from 5 to 40 per cent of the quantity not delivered. This mechanism is sought to be justified on the ground of ensuring better performance of CIL.
“The management seems to agree with the premise that the qualitative changes for securing productivity can be obtained only by a threat of penalty of 40 per cent. To us, it looks like an arrangement to transfer thousands of crores of public money to the private power producers in the name of penalty over CIL,’’ it warns.
CIL has 17 directors and seven independent directors.