PMO Tells Coal India to Import Coal for Power Companies Close.

NEW DELHI: Prime Minister Manmohan Singh has directed Coal India Ltd (CIL) to import coal to ensure supplies for 20 years to 50,000-mw power plants that are proposed to be commissioned by March 2015, a government statement said, cheering fuel-starved power producers and helping their shares leap up to 13%.

The Prime Minister's Office (PMO) said that the decision to boost coal supply had solved the "immediate major problem" for the sector and the government would now turn to medium- and long-term issues of the power sector. The issues were raised last month by a delegation of Indian industrialists, including Ratan Tata and Anil Ambani.

Coal India, which has struggled to supply committed quantities of coal to the power sector, would be penalised if its supplies fall below 80% of the commitment and given incentives if they rise above 90%, the statement from the PMO said.

"Coal India will arrange for supply of coal through imports or through arrangement with state/central PSUs who have been allotted coal blocks. The proposed course of action has been approved by the prime minister a¦ The proposed set of arrangements is being seen as a major step forward in solving the problems of power sector in the country and is likely to boost investors' confidence in India's power sector," the PMO said.

Private power companies welcomed the move that will lead to signing of fuel supply agreements after three years. Shares of Adani Power gained 13% while Reliance Power rose 12.7% against its previous close. Torrent Power and JSW Energy went up about 8% while Tata Power and GVK Power ended the day with about 6% gain.

"This will give confidence to bankers, who were reluctant to disburse funds to projects under construction for want of credible fuel supply agreements. About 25,000 mw were operating at sub-optimal capacity due to inadequate supply of coal against the confirmed letters of assurance," Association of Power Producers director general Ashok Khurana said.

For power plants that have been commissioned up to December 2011, fuel supply agreements will be signed by next month. Coal supplies would, however, be restricted to power plants that commit long-term power supply to states, the official statement said.

A committee headed by Principal Secretary to Prime Minister Pulok Chatterjee took the decisions and they have been approved the prime minister, it added.

The PMO said resolving the problems of the power sector augured well for capacity addition as well as economic growth. "It will help not only in achieving power generation capacity targeted in the 12th Plan but also assist in achieving the targeted growth of GDP. With the resolution of the immediate major problem, the attention of the committee will now shift to other medium and long-term issues affecting the power sector," the statement said.

The decisions follow a meeting of the prime minister with a delegation of industrialists, including Ratan Tata, Cyrus Mistry, Anil Ambani, Anil Agarwal, Gautam Adani and Ashok Hinduja, on issues affecting the power sector.

Prime minister had directed setting up a secretary level committee headed by Chatterjee to chalk out time bound roadmaps. The private CEOs delegation is likely to meet Chatterjee again on February 22.

Source : economictimes.indiatimes.com