In a step pushed by the Prime Minister, Dr Manmohan Singh, to provide relief to the power sector and boost investor confidence, Coal India will sign by March-end agreements for supply of fuel to power projects commissioned up to December 2011.

The decision, which addresses long-standing tussle between the state-controlled coal sector and private power producers, is an outcome of the meeting of Committee of Secretaries (CoS) constituted by the Prime Minister to look into issues impacting the power sector, held on February 1.

During that meeting, it was agreed that Coal India would sign Fuel Supply Agreements (FSAs) with power plants that have entered into long-term Power Purchase Agreements (PPAs) and have been commissioned or would get commissioned on or before March 31, 2015.

“For power plants that have been commissioned up to December 31, 2011, FSAs will be signed before March 31, 2012,” the Prime Minster’s Office said in a statement today.

Further, the FSAs would be signed for full quantity of coal mentioned in the Letters of Assurance (LoAs) for a period of 20 years. If the supply is below 80 per cent, then Coal India would be penalised whereas in case the supply is above 90 per cent, the company would be provided incentive.

In case, Coal India is unable to meet the obligations, the company would have to arrange for fuel through imports or other arrangements, the statement said.

Noting that the proposed course of action has been approved by the Prime Minister, the statement said these arrangements would provide relief to power plants with estimated capacity of more than 50,000 MW.

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