india asks coal india to import coal

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India Asks Coal India To Import Coal To Meet Shortages

Published June 22, 2012

Dow Jones Newswires

ndia on Friday asked Coal India Ltd. (533278.BY) to import coal to plug local shortages and also to rework its fuel supply pacts with utilities, as the government puts pressure on the state-run miner to ensure adequate supplies in a bid to boost power generation.

Coal India Chairman S. Narsing Rao told Dow Jones Newswires that the office of Prime Minister Manmohan Singh asked the company to import coal through state-run trading firms such as MMTC Ltd. (513377.BY) and State Trading Corp. Of India. (512531.BY).

The directions to Coal India from Pulok Chatterji, principal secretary at the Prime Minister's Office, come as India's coal shortage has widened to 192 million metric tons in the financial year that began April 1 from about 85 million tons two years ago.

The government is concerned that any shortfall in supplies by Coal India, which meets 80% of India's coal needs, will have wider ramifications for the economy as more than half of the 202 gigawatt of generation capacity is coal-based, as is most of the planned capacity.

On June 11, Mr. Rao had said that Coal India planned to import up to 30 million tons of coal this year but only if it got firm orders. The company has never imported coal previously.

Friday, Coal India was also asked to rework its draft fuel supply pacts by increasing the penalty it had imposed on itself for failure to meet supply commitments to power stations. But the company was given a free hand to set a new minimum supply level between 65% and 80% of the annual contracted dispatches.

"Coal India's board will take a final decision in July," Coal Secretary S.K. Srivastava said after a meeting convened by the Prime Minister's Office to review the coal shortage scenario.

Coal shortages have widened over the past two years as Coal India's output stagnated due to several obstacles including delays in getting environment clearances to mining projects.

Earlier this year, the Prime Minister's Office and President Pratibha Patil had directed Coal India to sign fuel supply pacts with utilities meeting minimum 80% of the annual supply commitment or else face a penalty. The company fixed the penalty at a meager 0.01% of the value of the shortfall.

Also, the penalty wasn't applicable for the first three years of signing the fuel pact. The Prime Minister's Office Friday asked the company to remove the clause after power companies protested.

Mr. Srivastava also said that, to increase local coal availability, the government has set up a group of officials to consider the cancellation of licenses of 58 coal block allocatees who have missed goals of developing the reserves. He didn't name the companies.