Coal India ordered to sign FSAs with power companies
03 April 2012
The Government of India has ordered Coal India to sign fuel supply pacts with power producers at the 80 per cent trigger level. The order, which came as a presidential directive, will ensure coal supplies to fuel-starved power companies wanting to start power production.
The directive was issued to Coal India Ltd as the public sector undertaking failed to meet the 31 March deadline set by the Prime Minister's Office for entering into fuel supply agreements with power producers.
Under clause 37 of the memorandum of association of Coal India, the government has the right to invoke 'presidential directive' to overrule the board's decision if no consensus is reached on issues related to national interest.
Independent directors of Coal India were against the signing of fuel supply agreements assuring 80 per cent fuel supplies to power producers, with a penalty clause.
Coal minister Sriprakash Jaiswal, said he expected the FSAs to be signed anytime within the next 24-48 hours. He, however, said Coal India's board could decide on the penalty clause. He also said CIL would not have to import coal.
The PMO had, as far back as in February, directed Coal India to sign the supply agreements with the power companies by 31 March.
Coal India, however delayed a decision with independent directors following the activist investor The Children's Investment Fund (TCI)'s line on CIL's losing profitability.