CIL yet to take decision on Presidential directive to ink fuel supply agreement

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Coal India Limited (CIL) on Wednesday said that they have initiated the process to 'legally vet' the Presidential directive, which required it to sign fuel supply agreements (FSAs) with independent power producers.

CIL chairman Zohra Chatterji said that they would sign the document after thoroughly going through all the clauses of the agreement.

"FSA (fuel supply agreements) is being discussed in the board and it is under legal vetting. It will be placed before the board again and then it will be signed," said Chatterjee. "As soon as possible," she added, when asked when will it be signed.

CIL had not signed FSAs with power generators since March 2009 because of supply constraints. The government directed CIL to sign FSAs with all new power plants commissioned by December 2011 or that will be constructed by March 2015.

The directive came after CIL's board failed to sign FSAs by the March 2012 deadline set by the Prime Minister's office.

Over the long term, the directive could resolve some of the bottlenecks preventing higher coal production, although this will also require further action from the government. If CIL fails to increase its output to the desired levels it will face penalties.

The FSAs signed under this directive will initially have little effect on domestic coal supply as the reasons for lower output - infrastructure bottlenecks, lack of environmental clearances, problems in land acquisition, high rainfall and labour - need long-term solutions.