By Sanjeev Choudhary and Krittivas Mukherjee
NEW DELHI, April 17 (Reuters) – Coal India’s offer
to pay a paltry penalty for missing supply obligations will not
force the state-run monopoly to ramp up production quickly to
meet burgeoning demand in energy-starved India, power producers
said on Tuesday.
The world’s biggest coal miner has been ordered by the
government, which owns 90 percent of Coal India, to sign
contracts agreeing to supply at least 80 percent of the coal
requirement of utilities that have been hobbled by scarce fuel.
The company’s board approved the proposal on Monday and
offered to pay a penalty of 0.01 percent if it fell behind
schedule.
“This is a task well begun, but only half done,” said A.
Issac George, chief financial officer at GVK Power, referring to
the supply contracts that were proposed after industry captains
such as Ratan Tata and Anil Ambani approached Prime Minister
Manmohan Singh for an end to fuel shortage.
The penalty would apply only after three years and so
changes almost nothing in the short term for many power plants,
which have been running below capacity due to fuel shortage over
the past year.
Hemmed in by regulatory hurdles and land acquisition
problems, Coal India’s production has stagnated over the past
three years and power companies were hoping a stringent penalty
clause in the fuel supply pact would have goaded the company to
take measures to boost output.
Coal India expects to raise its output to 464 million tonnes
in 2012/13, after producing about 436 million tonnes in the
fiscal year that ended in March – missing its scaled down
target.
It would need an additional 64 million tonnes in the current
fiscal year to meet obligations under the new fuel pacts. But
the company may not be able to boost production in line with
demand and may have to resort to imports.
Continued…
