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India applies pressure on coal monopoly to end power shortages

The Indian government has acted to alleviate chronic power shortages that hinder its economic growth ordering its monopoly coal miner to guarantee long-term supplies to coal fired power plants or face penalties.

It has asked the world’s largest coal miner, state-run Coal India, to sign 20-year fuel supply deals with power projects that are due to be commissioned by 2015 and have an agreement with distribution utilities to sell power.

This would help power plants with an estimated capacity of more than 50000 MW a government statement said.

The government decision followed intensive lobbying by top executives from India’s power companies, who had sought the help of Prime Minister Manmohan Singh to boost supplies of coal.

Domestic coal supply has fallen short of targets, largely due to regulatory hurdles faced by miners, while poor infrastructure hinders the transport of imported coal, leaving many power plants running below capacity.

Until now, Coal India’s long term contracts were for a five year period and the last one it signed was in 2009.

Reuters reports that Coal India BSE:à‚ 533278 NSE:à‚ COALINDIA, which accounts for about 80 per cent of coal production, aims to produce 464 million tonnes in 2012/13, and has already scaled down output target to 440 million tonnes in 2011/12.

Coal, which accounts for more than half of India’s power generation, will be required for 85 per cent of the additional 76000 MW capacity addition the country targets during 2012-17.

Coal India will have to supply at least 80 percent of the fuel commitment it makes to power producers, failing which it would attract a penalty, the statement said, without elaborating.

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