Coal Distribution Policy Amended to Reduce CIL's Supply Commitment

The Coal Ministry has changed the existing coal distribution policy to clear the legal hurdle for Coal India (CIL) to reduce its coal supply commitment from 100% to 80%, in the new fuel supply pacts and importing coal to meet the production shortfall.

CIL has been asked by the government to commit a minimum supply of 80% of coal required by power plants while signing fresh fuel supply agreements for 78,000 MW capacity that may be commissioned during April 2009- March 2015.

During the remaining four years of the current 12th Five-Year Plan, the coal PSU has to supply 65-75% coal from domestic sources while the balance fuel requirement can be met with imports.

CIL will supply imported coal at cost plus basis. However, the power companies have the choice to import coal on their own. It will supply 65% domestic coal during 2013-14 and 2014-15, 67% in 2015-16 and 75% in the terminal year of the Plan.

The company had earlier agreed to sign FSAs for coal supply to 60,000 MW capacity only.

But later the cabinet committee on economic affairs asked it to sign FSAs for additional 18,000 MW capacity including 7,000 MW of stranded capacity.

Following that, the coal ministry has issued another presidential directive to ensure that CIL signs FSAs for coal supply to 78,000 MW capacity and not just 60,000 MW.

The first directive was issued by the ministry to CIL in April last year after the PSU's rejected the government proposal for it to meet at least 80% coal requirement of power companies under fresh FSAs.