Coal India to pay hefty penalty on supply shortfall

Clearing the way for signing of fresh fuel supply pacts with power producers, State run Coal India (CIL) has agreed to pay penalties of up to 40% on failing to supply at least half of the contracted quantity to power producers under the fuel supply agreements (FSAs). As per decided norms, if the supply of the company is between 50% and 60% of the assured quantity, then a penalty of 10-20% would be levied. In case the supply is between 60% and 65% of the contract, CIL would attract a penalty of 5%. While that between 65% and 80% of the contracted quantity then the rate of penalty would be 1.5% of the value of the shortfall.

However, no penalty would be levied if CIL supplies 80% or above the committed quantity of the fuel. Of the committed 80% of the assured supply, CIL would meet 15% through imports and 65% through domestic production. Public sector miner for fulfilling this obligation has agreed to import 18-20 million tonnes (mt) of coal this year, provided these producers agree to share among themselves the cost of buying coal overseas and shipping it to India, and with its board of directors meeting held on August 7, the proposal for same has been approved.

The government in April had issued a presidential directive to CIL to sign FSAs with the power producers assuring them of at least 80% of the committed coal delivery. As the PSU was unable to meet the deadline of March 31 to enter into agreements with power producers which were facing fuel crunch.