CIL board approves draft FSA, but with riders

The board of directors of Coal India (CIL) today approved the new draft fuel supply pact, but with riders, according to a government official.

"The Coal India board which met today cleared the clauses of draft FSA [fuel supply agreement] subject to certain conditions," the official told PTI.

The official, however, refused to elaborate on riders. "I cannot comment on the conditions," the official said.

The Prime Minister's Office (PMO) had last month directed CIL to ink FSAs with 80% supply clause before March-end for power plants that have been commissioned on or before December 31, 2011.

Earlier, independent directors in the board meeting held on March 22 had resented a clause in the FSA for ensuring at least 80% supply of the commitments to power plants.

The board had also met earlier twice over the past one week, but no consensus could be reached as there were disagreements over some of the clauses in the FSA.

The independent directors, according to sources, had opposed to the clause for ensuring at least 80% supply of the commitments to the power plants stating that the PSU as facing problems in enhancing coal production and was not in a position to meet the commitment.

Amid power plants facing a supply crunch, the PMO had said that FSAs would be signed for full quantity of coal mentioned in the Letters of Assurance (LoAs) for a period of 20 years.

It had elaborated that if the supply remains below 80%, then CIL would be penalised and would be provided incentives if it was found above 90%.

In case, CIL is unable to meet the obligations, the company would have to arrange for fuel through imports or other arrangements, it had said.