CIL may be penalised if it fails to meet fuel supply pact: PMO

The Committee of Secretaries constituted by Prime Minister Manmohan Singh to look into matters impacting power sector growth is believed to have decided today that Coal India will be penalised if it fails to supply fuel at an 80% "trigger" level.

"It was decided that Coal India will sign fuel supply agreement at full LOA [letter of allocation] quantity, below which it would be penalised," sources said.

"If it [Coal India] supplies at below 80% level, it would be penalised and above 90% level, they would be incentivised," sources added.

Coal India would sign the FSA, or fuel supply agreement, with all plants commissioned till December 31, 2011, immediately, sources said, adding that same treatment will be given to those new plants ready for commissioning -- with an estimated capacity of 60,000 MW -- by 2014-15.

The Coal Ministry, sources said, made a plea in the meeting that the trigger-level in the FSA should be brought down as "the amount of coal available is inadequate."

A final decision on the FSA is likely to take place in a meeting scheduled for next week, sources added.

The meeting, which was headed by Prime Minister's Office Principal Secretary Pulok Chhatterji, was attended by Commerce Secretary Rahul Khullar, Power Secretary P Uma Shankar and Coal Secretary Alok Perti, among others.

The Prime Minister had constituted the CoS after top industrialists, including Ratan Tata of Tata Power, Anil Ambani of Reliance Power, Anil Agarwal of Sterlite Energy, Prasant Ruia of Essar Power, Gautam Adani of Adani Power and Ashok Hinduja of Hinduja Group, highlighted the power sector's woes in a meeting on January 18.