Coal supply pact with power producers soon

Coal supply pact with power producers soon

The crisis facing power generating units starved of coal may end soon with  Coal India finalising a model fuel supply agreement with the energy producers, said Union Power Minister Sushilkumar Shinde on Thursday.

Coal India Limited (CIL), a major coal producer of the country, has been grappling with the model agreement under which it undertakes to supply at least 80 per cent of the fuel requirements of power generating companies.

“It (agreement) is in the final stages. The technical hitches are being addressed," Shinde told reporters.

CIL’s board of directors have been in a huddle over the last two days trying to resolve the issue, amidst reservations expressed by some independent directors and legal recourse threat from the UK-based hedge fund, TCI, which is a minority shareholder in the company.

After meeting with the power sector honchos, Prime Minister's Office (PMO) had directed the CIL last month to ink FSAs with 80 per cent supply commitment before March-end with power plants commissioned on or before December 31, 2011.

However, the PMO direction did not find favour with independent directors of CIL, a listed and traded PSU. Minority shareholders questioned the move.

The Minister said that the CIL has indicated the availability of 347 million tonne of coal for   2012-13 with the possibility of additional availability from pithead stocks and e-auction. The Ministry of Power has assigned a provisional import target of 46 million tonnes for the power utilities for 2012-13.  

The Power Ministry is also considering financial bailout for distribution companies that are grappling with huge losses.

The net loss of 15 discoms -- which account for over 90 per cent of country's power consumption -- after subsidies was Rs 27,000 crore for the year ended March 31, 2010.

With just about 54,000 MW capacity being added in the 11th Plan so far, the power sector is set to miss the revised capacity addition target of 62,000 MW.

The capacity addition target for the 11th Plan period ending March 31 was revised downward to 62,000 MW from the earlier target of 78,500 MW. Acute fuel shortages and high coal prices had hit capacity addition plans, the Minister said.