Govt may reject Coal India's min penalty clause in FSA

Power Ministry calls clause a bit of a 'downer', make seek PMO help to resove impasse

The Power Ministry may not accept Coal India's minimum penalty clause in the fuel supply agreement and may seek Prime Minister Office's intervention on the issue.

"We are awaiting the minutes of the Coal India Board meeting and then we may approach PMO," a Power Ministry official said, adding that the penalty clause was bit of a "downer".

State-owned Coal India Ltd (CIL) in its board meeting last week approved signing of the agreements with the power producers for minimum assured supply of the fuel, following a directive from the government.

Failure to supply at least 80% of the committed quantity to the power firms would attract a penalty of 0.01%. The penalty clause would be operational after three years.

The government issued a directive on April 3 to CIL to commit a minimum of 80% of fuel supply to power producers, with a penalty clause, following a meeting between the private power company heads and the PMO.

Country's largest power producer NTPC, which is supposed to sign the FSA for additional supply of about 25 million tonne for capacity addition between 2009 and 2012, refused to ink the pact on the issue of quality of coal.

CIL, meanwhile, has entered into fuel supply pacts with five power firms for minimum assured supply of coal as per the directive.

"So far five firms have signed fuel supply agreements with CIL, including Lanco Anpara Power and Bajaj Hindustan," a source in the know of the development said.

CIL, world's largest coal producer, which accounts for over 80% of the domestic production has fixed a production target of 468.74 million tonnes for 2012-13.

The company had set a goal of producing 447 million tonnes of coal during the last fiscal (2011-12), but managed to do only 435.84 million tonnes.

NTPC, which generates major chunk of its electricity from coal requires 160 million tonnes of the fuel during the current financial year.

The current installed power generation capacity of NTPC is close to 40,000 MW.

According to the Planning Commission's estimates, the country's energy supply needs to grow at 6.5% annually if the nation wants to achieve annual economic growth of 9% during the plan period.

The Power Ministry may fix generation target close to 1,00,000 MW for the XIIth Plan period (2012-17).