The United Progressive Alliance government on Tuesday issued a Presidential directive to Coal India Ltd (CIL) to sign fuel supply agreements (FSAs) with power producers assuring them of at least 80 per cent of the committed coal delivery.
The move comes after the state-owned firm failed to meet a March 31 deadline set by the Prime Minister's Office for it to enter into agreements with power producers that have been were facing a fuel crunch.
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“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.
Mr. Jaiswal said it would not take more than two-three days for CIL to sign the FSAs. However, the crucial clause of penalty on CIL in the case of failure to meet 80 per cent supply, has been left to the public sector unit’s board, the minister said.
“It is for Coal India to decide (penalty).They have full freedom (on it),” Mr. Jaiswal 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 had to resort to this option to force the Maharatna PSU’s hand.
The government had earlier issued a 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 power producers welcomed the decision, analysts say the Rs50,000 crore CIL may stand to lose heavily in case it falters on its commitment to supply fuel to energy firms. CIL share closed Rs 342.75, gaining 0.65 per cent. The Bombay Stock Exchange’s benchmark Sensex closed 0.68 per cent higher at 17,597.42 points.
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