FSA: Directors seek to secure CIL interest

Amid controversy over the coal block allocation issue, which may make it necessary to question past directors of Coal India Ltd (CIL), the issue of board approval for signing fuel supply agreements (FSAs) with power plants has been deferred following reservations expressed by independent directors of CIL, who wanted measures to protect CIL's interest, before entering in to any binding pact with penalty clauses. The CIL board, which met on March 22 in New Delhi, with the FSA issue as its main agenda, failed to arrive at a consensus. It has now been decided to meet again next week to deliberate on this matter. The board had met to consider the issue of signing new FSAs with power plants which have entered into long-term power purchase agreements (PPAs) with Distribution Companies (DISCOMS) and have been commissioned after March 31, 2009. That the public sector behemoth would have to undertake this fresh commitment in order to increase coal availability to the power plants was among the budgetary announcements made by the Union Finance Minister Pranab Mukherjee. His proposal was a follow-up on a directive issued by the Prime Minister's Office to improve coal supplies to power plants. The FSAs are to be signed by March 31, 2012. The independent directors said that they would like some of the clauses in the proposed FSA modified so that CIL's interest was protected. A former CIL chairman said that compliance with the PM directive would not work unless a similar directive was issued to departments which were responsible for enhancing production and movement of coal