Power Secretary P Uma Shankar has recently issued a letter to Coal India Ltd (CIL) to compensate for the losses of power companies due to failure of CIL to provide coal to the power firms.
This is sparked a confrontation between to prominent Ministries of India; Coal Ministry and Power Ministry.
Power Secretary blamed CIL for hurting power sector investments as financial institutions had been shaken by the coal shortages.
We believe that the move of CIL’s independent directors to block the import of coal and their sale at a discount to power producers as suggested by the Central Electricity Authority has triggered the Power Ministry to issue the said letter.
The views depicted in the letter by Mr. Shanakr were:
- Power producers had made investments after coal supplies were approved by the Coal Ministry and assurance letters issued by CIL, Shankar wrote in his letter.
- However, CIL has failed to honour its binding obligation, thus leaving such assets stranded, threatening not only their viability, but likely to make them non-performing assets.
- CIL board has also rejected the suggestion to import coal.
According to Mr. Shankar:
“CIL board and its director will do a great service to the nation if they do some soul searching on their responsibility and their commitment to increase production of domestic coal and ensure adequate supply of coal to help the growth of the country and not expose power and banking sectors to the risk of jeopardising all their investments, which is largely public money. In fact, as a responsible corporate entity, CIL should compensate the power producers for the loss suffered by them due to its failure in providing them the promised fuel to run their plants at a viable level. The PSU has obtained bank guarantees worth hundreds of crores from the power producers to bind them in an offtake agreement... CIL has failed to honour its commitments.
More news on this topic:
http://www.indianexpress.com/news/power-secy-to-coal-india-no-coal-pay-companies/1011143/
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