Coal India Limited has been directed by the Coal Ministry to sign Fuel Supply Agreements (FSA) with power plants which are getting commissioned between January 2012 and March 2015.
The directive came in response to a clarification sought by the Coal India on whether it should sign supply pacts with new thermal plants on the terms mentioned in the existing contracts or the new agreements, which significantly dilute the miner's supply obligations.
Coal India had approached the ministry as a presidential directive asked it to sign FSAs for plants that came up between April 2009 and December 2011, but it did not mention anything about plants commissioned after this period.
According to the ministry, about 40,000 MW of power generation capacities would be commissioned between January 2012 and March 2015.
Sector experts say this will increase pressure on the state-run miner, which is already struggling to meet the fuel demand of existing power units.
Coal India missed its revised 2011-12 production target, achieving only 435.84 million tonne against the projected 447 mt.
Coal India is also facing stiff resistance from power companies over the new FSAs, which these companies say are heavily loaded in favour of the miner.
Coal India has not been able to convince power producers, including the country's largest NTPC, to sign the new agreements even three weeks after the drafts were sent to them. Of the 50 FSAs it was supposed to sign, Coal India has managed to sign only 13.
The decision to invite new units to sign the same FSAs is likely to irk power producers even more. Power producers want to sign the FSAs on the terms of the existing contracts, which stipulate that if Coal Indi fails to supply 80% of the contracted coal, it will pay 40% of the value of the shortfall as penalty. This penalty has been reduced to 0.01% in the new FSAs.
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