Sign FSA With Power Cos To Ensure Coal Supply.

NEW DELHI: With power companies facing coal shortages and risk of their projects becoming "unfinanciable", the Planning Commission has asked the state-run PSU Coal India (CIL) to sign pacts with them to ensure sufficient supply of dry fuel even if the coal miner has to import it.

Coal India should plan for imports if necessary but should sign FSAs (Fuel Supply Agreements) which provide reasonably high assurance of fuel, Planning Commission Deputy Chairman Montek Singh Ahluwalia told the Group of Ministers (GoM) on coal during its meeting this month.

FSA is a legally enforcable document that contains provisions for incentives and penalty for failure in meeting the commitment.

"Power Minister emphasised the need to ensure adequate availability of coal in 2011-12 as well as during the 12th Plan (2012-17). He stated that CIL is at present not willing to sign FSAs for a high enough percentage of delivery of coal," an official document pertaining to GoM said.

Power Minister Sushilkumar Shinde along with Ahluwalia are members of 12-member GoM, headed by Finance Minister Pranab Mukherjee, constituted to sort out issues impeding the country's coal production.

The country faced shortage of about 70 million tonnes (MT) of coal last fiscal, which is likely to touch 137 MT in the current financial year.

Maharatna Coal India which accounts for over 80 per cent of the domestic need had earlier said that the responsibility on it to meet the entire demand of the country, even by import is "practically impossible."

The world's largest coal producer also said that it was not in position to supply coal to new customers this fiscal.

"After accounting for the existing commitments and the quantity to be offered under e-auction, the net coal quantity available to...new consumers would be minus 11 million tonnes (this fiscal)," CIL Chairman N C Jha had said in a meeting, held to review Coal Distribution Policy earlier this month.

CIL as on April 30, 2011 has 1,599 fuel supply agreements with various firms for 391 million tonnes of coal.

National Coal Distribution Policy (NCDP) mandates CIL to meet the entire demand under the FSA even by import of coal if feasible.

The state-run coal giant has been unable to achieve their planned production targets. It has attributed shortage in production to various constraints like delay in obtaining environmental and forestry clearances, land acquisition and local law and order problems.

It missed its production target, and produced 431.325 MT of coal in the last fiscal, even after the target was revised to 440.20 MT.

Source : economictimes.indiatimes.com