Committee of Secretaries recommended provision of 80% Coal to Power Plants by CIL

Committee of secretaries, led by the prime minister’s principal secretary Pulok Chatterji  on 1 February 2012 recommended that state-run Coal India should step up supplies and face penalties if it fails to provide 80% of coal allocated to a power plant.

Prime Minister Manmohan Singh had set up the committee in January 2012 after leading industrialists, including Ratan Tata and Anil Ambani, sought his intervention to help the power sector. Power producers are currently facing several problems such as an acute fuel shortage, delays in environmental clearances, inefficient state utilities and reluctance of banks to lend to the sector.

The committee is in favour of giving incentives to Coal India to provide 90% of coal, it had agreed to supply power producers. Coal India was found to be supplying much lower quantity of coal, thereby leading to lower generation. This prompted banks to hold back funds until Coal India signs a formal fuel supply agreement (FSA).

The committee wants Coal India to sign FSAs with power plants that have been commissioned till December 2011.
The shortage of coal took alarming proportions in 2011 when floods and agitations hurt output and transportation, reducing fuel stocks in many power plants to less than four days requirement, against the norm of keeping enough coal to meet three weeks’ demand.

The power sector is also facing an acute shortage of natural gas as domestic supply fell and imported liquefied natural gas (LNG) is too costly for power producers.