Coal India Ltd.

State run Coal India’s board has given their approval for signing Fuel Supply Agreement (FSA) with power companies before April 20, 2012. The coal major, however, has agreed to keep the penalty for failing to supply at least 80 percent of the contracted coal, but at a minimum level. The Maharatna company will pay a penalty of an average of 0.01 percent of shortfalls in supplies.

The government on April 3 issued a presidential directive to CIL to commit a minimum assured fuel supply to the power producers, failing to which the company would be subject to paying a penalty. Keeping in mind the intense lobbying by the power sector, the government directed Coal India (CIL) to guarantee long-term supplies to the power sector, even if it has to resort to imports.

Coal fuels more than half the power generated in India, which does not produce enough power to meet the demands of a fast-growing economy and increasingly affluent population of 1.2 billion people.