CIL board gives in, to sign supply pacts with 50 power companies

Forced by a presidential directive, government-owned Coal India is likely to sign fuel supply agreements (FSAs) with at least 50 power companies after a board meeting next week.

The board, on the urging of six independent members, had earlier turned down a government directive to commit at least 80 per cent supply to power companies. It is likely to meet on April 16 to approve FSAs for a combined 28,000 Mw of projects commissioned before December last year.

The signing would break a three-year logjam with consumers over supply commitments. Last week, a Rashtrapati Bhavan directive was issued to Coal India to sign the supply pacts. “The board would meet on April 16 and 17 to approve the FSAs. This is merely a formality after the President’s directive,” a senior official from the coal ministry told Business Standard.

One of the board members has said they were planning to sign FSAs with at least 50 companies after the meeting. “These include NTPC, Damodar Valley Corporation, PSEB and also private companies like Reliance Power and Tata Power. The agreement would be for supplying, may be, about 70-80 million tonnes (annually) for these companies,” he said. The ministry official hinted that honouring the directive would mean supplying an extra 240 millio tonnes coal to power firms, in addition to the 306 mt being supplied currently.

An 18-member delegation of the country’s most powerful companies in the power sector — including Tata Sons’ chairman Ratan Tata and Anil Dhirubhai Ambani Group chairman Anil Ambani — had flagged concerns over constrained supply in a meeting with Prime Minister Manmohan Singh. Singh had later asked Coal India to supply coal at 80 per cent commitment. The Maharatna miner, grappling with a severe output crunch due to delayed environmental clearances, has signed only three FSAs with power firms since March 2009. It has since been supplying coal on a memorandum of understanding (MoU) basis. These MoUs not only bind Coal India to a low commitment level of 50 per cent, but are non-enforceable.