Frustrated with the slow pace of movement on issues pertaining to coal industry, the Prime Minister’s Office (PMO) has convened a meeting on Friday to discuss and take a decision on the failure of Coal India Limited (CIL) to sign the fuel supply agreements (FSAs) with power producers, decide the fate of nearly 58 captive coal blocks to various players who have been issued show-cause notices and lack of fuel supply that was hurting power generation.
A high-level meeting of Finance, Power, Coal, Mines and Steel Ministry and CIL officials has been convened by Principal Secretary to the Prime Minister, Pulok Chatterjee, to discuss various issues impacting the coal industry. It is learnt that CIL will make a formal presentation on the fuel supply situation for the next few years and projections on production. CIL is understood to have already conveyed to the Coal Ministry that it would not be able to adhere to the Presidential directive on supply of minimum 80 per cent coal to power producers under the new FSAs and that it would only be able to achieve around 66 per cent supplies.
Inter-ministerial panel
The lack of fuel supply by CIL, despite PMO taking a number of meetings on the issue and issuing of a directive on FSAs, has badly hurt the power generation. CIL has proposed supply of around 66 per cent for 2012-13 and 55 per cent for the 2013-14 fiscal. CIL, which produces 436 million tonne, plans to enhance the capacity to 464 million tonnes by the end of 2012-13 fiscal.
The issue of setting up of an inter-ministerial panel, which will look into the reasons for delay in production from captive coal blocks and suggest measures to fast-track their development amid acute shortage of the fuel , would also be taken up during the meeting.
The panel, to be set up under the chairmanship of Joint Secretary, Coal, will comprise officials from Ministries, including Power, Steel, Law and Department of Industrial Policy & Promotion. The PMO will also take a call on the fate of 58 captive coal blocks of firms such as Reliance Power, Tata Power and Hindalco, which were issued show-cause notices for de-allocation for sitting idle on them.
“The Coal Ministry has received replies from all the allocattees of 58 coal blocks which were recently issued show cause notices for de-allocation. The PMO meeting will take a call on what action has to be initiated against these allocattees,” a senior Coal Ministry official said.
Fresh FSA propsal
Indrani Dutta writes from Kolkata
In a bid to break the logjam over the fuel supply agreements (FSAs), Coal India Ltd. (CIL) is likely to present to the Prime Minister’s Office on Friday a proposal for a fresh FSA, which will not only do away with the various force majeure clauses that the power sector has found irksome, but will also argue in favour of a staggered trigger level beginning at 65 per cent.
Sources said CIL, in a best production scenario, would be comfortable with a trigger level of 65 per cent for the first three years, followed by a trigger of 70 per cent in the fourth year and 80 per cent from fifth year onwards.
There would be no incentive till 80 per cent supply level was reached, but there would be a penalty if supplies dropped below 65 per cent of the annual contracted amount. This was being proposed more as an interim arrangement so that CIL got some breathing time to increase its production, they pointed out.
It may be mentioned that, at the behest of the PMO, the CIL board had hammered out in April an FSA in which a trigger level of 0.01 per cent (applicable after three years) was set along with a plethora of force majeure clauses. This made major consumers such as NTPC cry foul.
Against the expected 49 FSAs, only about 27 have been signed so far and none with either NTPC or DVC. The PMO meet is being held to break this impasse.
Keywords: Coal India Limited, fuel supply agreements, power producers
