Finally the Indian Power companies have got some good news on the coal front. Coal India Limited (CIL), the one of the biggest coal miners in the world, has agreed to sign new fuel agreements with power producers. These new fuel supply agreements will e guaranteed nature and CIL will pay a penalty of 0.01% of shortfall in supplies.
The company will start the procedure for signing the agreements by April 20, 2012.
Spark believed that, the government, CIL’s largest shareholder with a 90% stake, has forced it to sign fuel supply agreements with power producers, guaranteeing to supply 80 percent of contracted quantity.
The penalty clause according to the Chairwoman Zohra Chatterji has been kept at a minimum level and would be operationalized after three years.
Following intense lobbying by the power sector, the government directed Coal India to guarantee long-term supplies to the power sector, even if it has to resort to imports.
However, activist UK investor The Children's Investment Fund Management (TCI), which owns 1% of the company, has threatened legal action against the firm's directors for not protecting the interests of minority shareholders.
Coal fuels more than half the power generated in India, which does not produce enough power to meet the demands of a fast-growing economy and increasingly affluent population of 1.2 billion people.
The country has about 10% of the world's coal reserves but is still forced to import coal to meet demand.
Coal India's production has virtually stagnated over the past three years as the company battles regulatory and infrastructure hurdles.
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