Coal India fuel pacts mean subsidy to private cos: TCI

Press Trust of India New Delhi | Updated on March 12, 2018 Published on April 11, 2012

British hedge fund TCI, a minority shareholder in Coal India (CIL), today alleged that directing the coal PSU to sign fuel-supply pacts with power producers would amount to “direct transfer” of $19 billion to the private sector.

In a presentation made to Coal India board which is likely to meet next week, The Children's Investment Fund (TCI), said “we believe large industrial companies” pushed the Government to “impose new fuel supply agreements (FSAs) on CIL.”

Model FSA

The Government on April 3 issued a Presidential directive to CIL to commit a minimum assured fuel supply to the power producers, failing which the company would be subject to paying a penalty.

The move raised hackles of TCI and some independent directors on the board, which will soon consider a model FSA even as the Chairman and Managing Director designate, Mr S. Narsing Rao, would take about two more weeks to join.

Market rates

TCI said the coal prices should be linked to market rates as it would increase Coal India's profitability.

“We estimate that if CIL sells its FSA coal at market price levels, its profits increase by $19 billion ... Indian households consume close to 200 billion units of power per annum, which can entirely be paid for by dividend from Coal India,” TCI said in a letter to Coal India.

TCI had also threatened a legal action against the company management.

Following meetings of the power sector leaders in the Prime Minister's Office early this year, the Government issued a Presidential directive to CIL to commit a minimum of 80 per cent coal supply to the power producers.

As the Government has a majority stake in CIL, it has powers to direct the company on a particular course of action.

Published on April 11, 2012
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