Coal India agrees to sign fuel supply pact

Coal major will sign the FSA with power companies on April 20

Coal India's (CIL) board today approved signing of the agreements with the power producers before April 20 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 board] agreed upon the Fuel Supply Agreement [FSA] document and it will be signed within 15 days from the [date of] government directive," CIL acting Chairperson and Managing Director Zohra Chatterji said after the meeting of the board of directors here.

The Maharatna firm's board met for the first time after a Presidential directive was issued to the PSU in which the government holds 90% of the shares. Chatterji said the penalty clause would be operational only from third year of the agreement.

"The board also decided that the penalty would be 0.01%. It [penalty clause] would be operational after three years," she said, ruling out there would be any diversion of coal from the PSU's e-auction quota.

"E-auction will continue at the present level," she said. When asked upon the quantity of coal the PSU would import, she said, "It will be decided later."

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. The directive was issued following a meeting between the power sector honchos and the Prime Minister's Office.

Independent directors had objected to any government direction to CIL, which is listed on the stock exchanges. UK-based hedge fund, the TCI, a minority shareholder in CIL, has threatened a legal action against the FSA move.