Bloomberg News

Coal India Set to Miss Fuel Supply Deadline, Prolonging Shortage

March 29, 2012

Coal India Ltd. (COAL), the world’s largest producer of the commodity, will miss a government deadline to sign supply agreements with power utilities, an official said, delaying attempts to ease a fuel shortage.

The board of the state-owned company hasn’t agreed on a clause in the accord requiring Coal India to supply at least 80 percent of the contracted amount of fuel or pay a penalty, the government official said yesterday, declining to be identified because he wasn’t authorized to comment on the matter. The company will submit a fresh assessment of the agreement to the coal ministry today, the official said.

The government had given Coal India until March 31 to sign the agreements with utilities in Asia’s second-fastest growing major economy. A group of industrialists who stalled plans to spend $36 billion on building power plants met Prime Minister Manmohan Singh in January and urged him to take steps to reduce fuel shortages.

Coal India gained 0.4 percent, the most since March 22, to 332.80 rupees at the close in Mumbai yesterday. The stock has climbed 11 percent this year, compared with a 10 percent increase in the benchmark Sensitive Index.

The government ordered Coal India on Feb. 15 to sign the supply agreements with power plants and import the fuel if needed to overcome local production hurdles. The mining company hasn’t signed accords since April 2009, saying it could provide only 50 percent of the requirements of utilities.

The government has the power to order Coal India to sign the agreements, the official said.

The nation had 192,792 megawatts of installed capacity as of yesterday, the government said in a statement.

To contact the reporter on this story: Rajesh Kumar Singh in New Delhi at rsingh133@bloomberg.net

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net


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