New Delhi: The Prime Minister's Office on Wednesday said Coal India Ltd will sign long-term fuel supply agreements with private sector power generation companies.
With this initiative of smoothening coal supplies to private sector power producers, a two-year-old roadblock has been cleared.
In a tweet posted on the micro-blogging site Twitter, the PM's office said this initiative would help power plants with an estimated capacity of more than 50,000 MW.
"Coal supply resolution will help in achieving power generation capacity targets for the 12th Plan and the targeted growth of GDP in India," the Prime Minister's Office said.
Coal India would sign fuel supply agreements with power plants that have entered into long-term power purchase agreements with distribution companies and have been commissioned or would get commissioned by end of March 2015.
For power plants that were commissioned before the last calendar year, fuel supply agreements will be signed before the end of this financial year in March.
Supply pacts will be signed for full quantity of coal mentioned in the letters of assurance for 20 years with trigger level of 80% for levy of disincentive and 90% for levy of incentive.
In case of a shortfall, Coal India will arrange for supply through imports or through arrangement with state-owned companies who have been allotted coal blocks.
The prime minister has approved the proposed course of action, a separate official release issued by the government said.
"With the resolution of the immediate major problem, the attention of the committee will now shift to other medium- and long-term issues affecting the power sector," the release said.
The government is likely to peg India's power generation capacity addition target at 75,000 MW for the next five-year plan period that starts Apr 1.
Coal supply crunch has been one of the biggest bottlenecks holding back capacity addition in the power sector.
After a meeting between the heads of various private sector power companies and government officials, including Prime Minister Manmohan Singh himself on Jan 18, a committee was set up under the stewardship of Pulok Chatterjee, principal secretary to the prime minister, to look into issues hurting the power sector and take corrective steps.
On the table were demands like providing adequate supply of coal and gas to power plants at affordable prices, speedier environment and forest clearances, availability of power equipment and their financing.