With falling coal production, state-run miner Coal India (CIL) is planning to approach the government for relaxation in norms so that fuel supply pacts with consumers, barring power and fertilisers firms, are not mandatory on its part.
The PSU is unable to ensure a steady supply of coal to sectors such as power, steel, cement, aluminium among others under Fuel Supply Agreement (FSA).
"The company is thinking to enter into FSAs with only power and fertiliser sectors. We have a proposal that other sectors should be alloted coal through e-auction route," a source in the company said.
Currently, CIL allots 10% of its total coal production to smaller consumers through e-auction route.
"If sectors, including steel, cement and sponge iron, are brought under e-auction route, then instead of present 10%, CIL will have to sell 28% of its production through the e-auction route," the source added.
The FSA is a long-term pact between coal producers and consumers aimed at ensuring assured supply of fuel.
The relaxation in present norms could be given only after amendment in the New Coal Distribution Policy (NCDP), the source said.
"After the proposal gets a go-ahead from the company board, it would go to the committee formed for revisiting NDCP," the source added.
NCDP mandates CIL to meet the entire demand under the FSA even by import of coal if feasible while the company is of the view that it needs to be changed as CIL is not in a position to meet the entire demand.
CIL as on April 30, 2011, had 1,599 fuel supply agreements with various firms for 391 million tonnes (MT)of coal supply.
As far as power companies are concerned, 118 FSA pacts were executed for 298 MT of coal.
Around 78% of the total coal offtake from Coal India goes to power sector, while less than one% goes to the fertiliser industry, according to company officials.
Earlier in June, the Planning Commission had asked the PSU to sign pacts with power companies to ensure sufficient supply of dry fuel even if the coal miner has to import it as the companies facing coal shortages found their projects were becoming "unfinanciable".
The country faced shortage of about 70 million tonnes of coal last fiscal, which is likely to touch 137 million tonne in the current financial year.
CIL, which accounts for over 80% of the domestic demand, had earlier said that even after imports, it would be "practically impossible" for it to meet the total demand of the country.
The coal giant has been unable to achieve its planned production targets. It has attributed shortage in production to various constraints like delay in obtaining environmental and forestry clearances, land acquisition and local law and order problems.
It missed its production target last fiscal, and produced 431.325 million tonnes of coal even after the target was revised to 440.20 million tonne.
