Coal India, which has struggled to supply committed quantities of coal to the power sector, would be penalised if its supplies fall below 80% of the commitment and given incentives if they rise above 90%, the statement from the PMO said.
"Coal India will arrange for supply of coal through imports or through arrangement with state/central PSUs who have been allotted coal blocks. The proposed course of action has been approved by the prime minister a¦ The proposed set of arrangements is being seen as a major step forward in solving the problems of power sector in the country and is likely to boost investors' confidence in India's power sector," the PMO said.
Private power companies welcomed the move that will lead to signing of fuel supply agreements after three years. Shares of Adani Power gained 13% while Reliance Power rose 12.7% against its previous close. Torrent Power and JSW Energy went up about 8% while Tata Power and GVK Power ended the day with about 6% gain.
"This will give confidence to bankers, who were reluctant to disburse funds to projects under construction for want of credible fuel supply agreements. About 25,000 mw were operating at sub-optimal capacity due to inadequate supply of coal against the confirmed letters of assurance," Association of Power Producers director general Ashok Khurana said.
Source- Economic Times