The government yesterday (April 03, 2012), issued a presidential directive to state-run Coal India Ltd (CIL) to sign a 20-year fuel supply agreement (FSA) with new power projects, guaranteeing to supply at least 80% of the contracted quantity.
This is the second time that the government has taken this unusual step of issuing a decree to a state entity on a commercial matter. The government had issued such a directive to GAIL in 2005 to force the gas utility to choose a cheaper technology for laying the Rs 1,800-crore Dahej-Uran pipeline. The government decided on the step after six independent directors on the CIL board refused to clear the model FSA.
The independent directors said they did not have the confidence that CIL would be able to fulfill the minimum supply guarantee, and would attract penalty or would have to make up with costlier imported coal. But coal minister Sriprakash Jaiswal believed the directive would set off a 'revolution' in CIL. 'You have to set tough tasks. Then only you see performance improve. It is absolutely possible for Coal India to raise production,' he said.
He explained that the level of minimum supply would not be strain on CIL since generation companies have to seal agreements for selling 100% of the power they produce. The 80% supply guarantee for coal is linked to the quantum of electricity contracted in the power purchase agreements (PPAs). Mr Jaiswal said the government has left the 'crucial' decision on quantum of penalty to the CIL board.
Power firms rise as CIL inks to meet its requirement :
On the BSE Adani Power up by 3.27%, JSW Energy up by 2.88%, Tata Power up by 2.52%, Reliance Power up by 1.86%, Torrent Power up by 1.34%, GVK Power & Infrastructure up by 0.85% and NTPC up by 0.33%.
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This is the second time that the government has taken this unusual step of issuing a decree to a state entity on a commercial matter. The government had issued such a directive to GAIL in 2005 to force the gas utility to choose a cheaper technology for laying the Rs 1,800-crore Dahej-Uran pipeline. The government decided on the step after six independent directors on the CIL board refused to clear the model FSA.
The independent directors said they did not have the confidence that CIL would be able to fulfill the minimum supply guarantee, and would attract penalty or would have to make up with costlier imported coal. But coal minister Sriprakash Jaiswal believed the directive would set off a 'revolution' in CIL. 'You have to set tough tasks. Then only you see performance improve. It is absolutely possible for Coal India to raise production,' he said.
He explained that the level of minimum supply would not be strain on CIL since generation companies have to seal agreements for selling 100% of the power they produce. The 80% supply guarantee for coal is linked to the quantum of electricity contracted in the power purchase agreements (PPAs). Mr Jaiswal said the government has left the 'crucial' decision on quantum of penalty to the CIL board.
Power firms rise as CIL inks to meet its requirement :
On the BSE Adani Power up by 3.27%, JSW Energy up by 2.88%, Tata Power up by 2.52%, Reliance Power up by 1.86%, Torrent Power up by 1.34%, GVK Power & Infrastructure up by 0.85% and NTPC up by 0.33%.
....more info