Coal India Ltd, the world's largest producer of the fuel, has been told by the prime minister to sign 20-year supply agreements with the nation's power producers, which are reeling under a fuel shortage.
This is the first time since 2009 that CIL will sign such fuel supply agreements (FSAs) with the utilities. The Prime Minister's Office has asked CIL to sign FSAs ensuring that it meets 80 per cent of the power companies' their requirements.
State-run CIL has been given the liberty to import coal if its domestic production falls short of the requirements. But it will face penalties if it fails to sign binding FSAs, said the notice posted on the PMO's website.
Power plants commissioned up to 31 December 2011 as well as companies that have entered into long-term agreements with power distribution companies and are likely to switch begin production by 31 March 2015, will be eligible to sign the fuel security deal.
The move reportedly came after a core group headed by Pulok Chatterji, principal secretary to the prime minister, met on Wednesday.
CIL is said to be likely to seek clarifications from the PMO before 31 March, the deadline given to it by the government to sign the FSAs.