Coal India gets presidential directive to commit fuel to power cos

Cracking a whip, the government today issued a Presidential directive to Coal India to sign fuel supply agreements (FSAs) with the power producers assuring them of at least 80% of the committed coal delivery.

The directive has been given to the PSU, as it did not meet the deadline of March 31, set by the Prime Minister's Office for Coal India Ltd (CIL) to enter into agreements with power producers which were facing fuel crunch.

"Government has this power reserved so that whenever there is an emergency then that power can be used. As we saw an emergency.. there was a commitment by Coal India. Therefore, the government decided to sign the FSAs with 80 per cent commitment. That is why the directive was issued," Coal Minister Sriprakash Jaiswal told reporters.

He said it would not take more than two-three days for the CIL to sign the FSAs with the power producers.

However, the crucial clause of penalty on CIL in the case of its failure to meet 80 per cent fuel supply commitment, has been left to the PSU board, the minister said. "It is for Coal India to decide (penalty).They have full freedom (on it)," he said.

The directive comes in the wake of resistance from some of the independent directors of CIL to agree to penalties.

It is perhaps only the second time that the government has resorted to this option to force the Maharatna PSU agree to its directive.

The government had issued Presidential directive to state-owned gas utility GAIL India Ltd in 2005 insisting on a particular technology for laying the Rs1,800 crore Dahej-Uran pipeline.

While the power producers welcomed the decision, analysts feel the Rs50,000 crore CIL may stand to lose heavily in case it falters on its commitment to supply fuel to the energy firms. CIL share closed Rs342.75, gaining  0.65%.