S. Narsing Rao, Chairman and Managing Director, CIL

The Prime Minister’s Office has asked state-owned Coal India (CIL) to scale down the minimum assured supply level of coal to 65 per cent of the commitment under fuel supply pacts with power companies. The PSU firm has also been asked to go in for coal imports through the state-owned agencies like the STC and MMTC, sources said. Earlier a Presidential directive was issued in April, after the Prime Minister’s Office (PMO) intervention, asking CIL to commit a minimum of 80 per cent of fuel supply to power projects. CIL had its way in terms of making much less commitment for assured supply of 65 per cent for the first three years of the fuel supply agreements (FSAs). But in the fourth year, the supply has to increase to 72 per cent followed by 80 per cent in the fifth year of the agreements, sources added. However, the company will have to pay damages, equivalent to 10 per cent of the value of the shortfall in supply to the power producers. Besides, there would be no moratorium on payment of penalty. The directions to the monopoly supplier CIL were given after Pulok Chatterjee, Principal Secretary to the Prime Minister, took a meeting of Coal Secretary S K Srivastava and CIL Chairman and Managing Director S Narsing Rao. CIL which accounts for over 80 per cent of the domestic coal production will take the PMO directions before its board, which is likely in July. “We will now be having board meeting of CIL. They may take a final view on all these issues (penalty, FSA, coal imports),” Srivastava said. Earlier, CIL had informed the government that it would be able to assure a minimum supply of only 66 per cent of the total fuel contracted to power plants. “As per the production plans of Coal India Ltd for this year, the PSU has said that it can make available only 66 per cent of the committed quantity to the power producers for plants commissioned from April 1, 2009,” a source in the Coal Ministry had said. CIL, which produces 436 million tonne (MT), plans to enhance the capacity to 464 MT by the end of 2012-13 fiscal. Till June 16, CIL had entered into fuel supply pacts with 27 power units, including Adani’s Mundra Power plant in Gujarat. Other power units with whom the coal PSU has signed FSAs include Lanco Anpara Power, Reliance Power’s Rosa Power Project and CESC. CIL is to supply fuel to 48 power units as per the directive. The PSU firm had earlier said it was difficult to give a time frame for signing all of the pacts as the company was signing FSA as and when the power companies came forward.