Struggling to meet the growth and plan production targets, the Board of Coal India Limited (CIL), on Thursday, failed to finalise the Fuel Supply Agreements (FSA) even as Power Minister, Sushil Kumar Shinde, indicated that there were technical glitches in sealing the FSA pacts.
The independent directors on the CIL board have been very vocal against the clause of 80 per cent assured fuel supply under new FSAs stating that it would not be possible for CIL to live up to the pacts due to production constraints.
“The board of directors of CIL met today and deliberated on various clauses of draft FSA. Certain conditions need to be worked out before things are finalised,” a senior official said. When contacted for a response, an independent director, who is reported to have taken a lead role in rallying the six others to seek further discussions on this issue, said that he would not make any comments on this matter.
Prime Minister's Principal Secretary Pulok Chatterjee had last month held a meeting and directed CIL to ink FSAs with 80 per cent supply clause before March-end for power plants that have been commissioned on or before December 31, 2011.
Earlier, independent directors at the board meeting held on March 22 had resented a clause in the FSA for ensuring at least 80 per cent commitments supply to power plants. The independent directors, according to sources, had opposed the clause citing the problems faced by raising coal production. They had sought to modify some of the clauses so as to protect the Maharatna coal company's interest and the board meeting was fixed for March 29.
“The FSA is in the final stages. There are some technical problems and they are being addressed,” Mr. Shinde told journalists here on Thursday.
As per the budgetary announcements, the FSAs were to be finalised by March 31. This now seems unlikely. However, analysts felt that the threats issued by The Children's Fund, which is now the CIL's second largest equity shareholder (with a one per cent stake), on signing FSAs might also have come in the way of finalising the matter.
Some of the users of CIL coal said the company would not be able to live up to the 80 per cent FSA clause keeping in mind the past experience. “At the most, they can supply up to 60-65 per cent coal. After that, they just start supplying dust and, at times, mud, which is of no use to us,” a leading cement manufacturing company CEO said.
The situation was no different with the power users who felt that CIL was not in a position to fulfil its commitments on the 80 per cent FSA. Even the Power Ministry officials were sceptic about the move and said the PMO was trying to thrust situations which were not practical.
