The board of Coal India has gone against the instructions of the prime minister's office to commit fuel supply to power stations for 20 years by 31 March, and tossed the ball in the coal ministry's court saying it needed advice.
According to officials, the core issue that needed resolution was a clause in fuel supply agreements (FSAs) that imposed financial penalties on the state-run firm if it failed to deliver 80 per cent of the contracted quantity of coal.
The issue was discussed by the company's board for the third time in the past week, and according to company and independent sources, independent directors on the board argued against the directive from the prime minister's principal secretary, Pulok Chatterji.
"Some independent directors stressed on protecting minority shareholders' interests. These included aligning prices to international prices and reducing supplies to the power sector so that profits are increased. The fuel supply agreement on the other hand will make sure CIL meets the increased coal requirement of power companies at a predetermined price," The Economic Times newspaper reported an unnamed senior CIL senior executive as saying.
He added it would be a ''drain on the company's profitability", if it was forced to import costly coal to meet its commitments.
TCI, the UK-based hedge fund which had served a notice to the government alleging that the Indian government was pressurising Coal India to sub-serve its own interests welcomed the development. It had said the government was pressurising Coal India to sub-serve its own interests to help private power producers, which was against the interests of minority shareholders like the fund, which had taken a 1-per cent stake in the company after its IPO.