PMO tells CIL to beef up fuel supplies to power firms

Prime Minister Manmohan Singh is clearly serious about ensuring that Coal India Ltd supplies at least 65 per cent of the fuel required by power producers, whose output is sagging due to a perennial shortage of coal.

The Prime Minister's Office has laid down guidelines for state-owned CIL on fuel supply agreements (FSAs) with power companies, coal secretary S K Srivastava said today after a meeting with PMO and CIL officials.

All the issues discussed at the meeting in the PMO will be taken to Coal India board, he said, adding that increased penalties for CIL in case of default on the agreements were also discussed.

Coal India is the world's single biggest coal producer and supplies 80 per cent of India's coal, but nonetheless falls far short of meeting the country's demands. The tag 'world's biggest producer' can be misleading, as coal production in India is centered with the government and the few private companies allowed to dig their own coal cannot sell it commercially.

The PMO has asked CIL to supply at least 65 per cent of the quantity contracted with power companies within the first three years of signing the FSA.

Under directions from the PMO, which ultimately came to a Presidential directive, CIL was ordered late last year to sign FSAs guaranteeing to meet at least 80 per cent of the power producer's requirements. However the FSAs, reluctantly provided by CIL, have a minimal penalty clause in case of default on supply.

As a result, many power companies, including the state-owned National Thermal Power Corp, the country's biggest producer, and Damodar Valley Corp have refused to sign the agreements, saying they are not bankable.