Doomed future for Coal India?

Coal Mines

According to the reports, It was decided that "Coal India Limited (CIL) should sign Fuel Supply Agreements (FSAs) for full quantity of coal mentioned in the Letter of Assurances (LOAs) for 20 years, to be renewed every five years with trigger level of 80% for levy of disincentives and award 90% for trigger level of incentives, with power plants that have entered into long-term Power Purchase Agreements (PPAs) with Distribution Companies (DISCOMS)".

We don't know, tomorrow what will happen in coal and power sector. Twenty years is a long time frame. Coal and power are very much required for the development of infrastructure in India; both at the same time under performing.

In this situation, if CIL is going for a 20 year long supply contract; that too below market prices; with it's not so efficient background; the company may continue under performing for a long time. Many power plants, which for the last a few years rising like plants just after the rain, is not at all in a good shape. They were not able to sell electricity to the discoms profitably. Discoms - its better nothing to say about this doomed ones. I don't know how long they will be able to bear the weight of their own debt burden and losses even with government support.

Finally the government; it will be better to find a genuine solution instead of pushing CIL towards the volcano about to burst.

Sajeev.

References

1. Governemnt of India
2. Discom crisis and Indian power sector - Astitva, Search for an Identity

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