Power min writes to coal min on coal supply under MoUs

The power ministry has written to coal ministry with respect to coal supply under the memorandum of understanding (MoU).

Anshu Sharma, Reporter ,CNBC-TV18

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The power ministry has written to coal ministry with respect to coal supply under the memorandum of understanding (MoU). Sources say the ministry has asked the country's biggest coal miner to supply at least 80% of coal it had assured via the MoU. CNBC-TV18's Anshu Sharma reports.

Also read: India to get free power if coal FSA is at mkt price:TCI

Given that Coal India had signed Letters of Assurance (LoA) with power companies, the Government is now mandating Coal India to sign fuel supply agreements (FSAs) as power companies have made huge investments based on that assurance.

The MoUs were signed between coal companies and power developers, as a stop-gap move, for power plants commissioned after April 2009 till December 2011. New power plants require 30% supply of coal initially.

Under the MoU, the coal pricing is 40% above the notified price, say sources. The MoU will be extended for three months or till the FSAs are signed.

However, Coal India is currently struggling to raise production, and there is likely to be a shortfall in meeting the FSA requirements via domestic production.

The power ministry has asked the CIL to import coal to meet the 30 million tonne (mt) shortfall in the total committed supply to the power plants in the country.