Coal India sets a good example for other PSUs by adopting penalty proposal
India's state-run coal producer and supplier Coal India Limited (CIL) may have set an example for other PSUs in the country, when its board accepted a proposal to pay fine to the power producers in case it fails to supply anything less than 80% of the contracted coal amount.
As per the proposal if the government-run CIL supplies below 50% of the contracted quantity of the coal then it will have to pay 40% of the value of the coal that CIL fails to supply. For example, if the company supplies only 30% of the total contracted quantity then it will pay 40% of the total value of 70% of the coal that has not been supplied.
40% is the highest amount of penalty the proposal underlines to be paid to the consumer company. The amount of the penalty goes down with increase in the percentage of coal supplied coal.
“We agreed to revise the penalty levels and fix them in ranges. If the supply is between 50% and 60% of the assured quantity, CIL would pay a penalty of 10% to 20%,” S. Narsing Rao, Chairman, CIL told the media after the board meeting.
If Coal India
Limited succeeds in supplying 60% to 65% of the contracted quantity then the penalty comes down to 5%. Further 1.5% is the lowest amount of penalty the CIL would pay to the power producers, only in case the coal supply lies between 65% to 80%. The proposal clearly says that there would be no penalty if the supplies exceeds 80% of the contracted coal amount.
With this proposal, the passage of signing new supply pacts between the power producers and the CIL has been cleared as the meager penalty clause of 0.01% was posing an hurdle. The CIL has given assurance that it will supply 80% of the contracted quantity through import (15%) and domestic production (65%).
“CIL would also start importing coal on a small scale so that it is not "totally dependent on others over a period,” said Rao, Chairman, CIL as per the media reports.