The prime minister gets Coal India to commit to new supply pacts for 50,000 mega watts. This after power producers met the prime minister on January 18, and sought his immediate intervention on several issues related to the sector including the lack of coal supplies.

Speaking to CNBC-TV18, Zohra Chatterji, chairperson and managing director of Coal India said, the PSU major will sign FSAs only after power ministry provides the list of power projects. "We are examining ways to distribute the available production among power companies," she said adding, "...can formulate the supply strategy once the demand is clear."

Coal India is also looking at ways to ramp up production to meet the additional demand. However, Chatterji said, it will be difficult for the company to achieve its target for FY12.

Below is an edited transcript of her interview with Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video.

Q: The PMO has directed Coal India to sign fresh FSAs from here on with power producers. Does that look like a commitment that Coal India can honor given your own production targets?

A: FSAs have already been signed with power companies prior to 2009. As you know, the gap in supply was not as much as it is at the moment, so it was the policy to sign the FSAs at 90% trigger value and FSAs have been signed in the past.

However, the problem has risen after that because power generation picked up at a very fast pace and letters of assurance continued to be issued as per the normative requirement. We've arrived today at a stage when we are not really able to provide coal of the expected quantity as per normative requirement. Coal India started supplying at about 50% and that is when the companies were not willing to sign FSAs at 50% of normative quantity, so there was a bit of issue. We have heard that there have been decisions in this regard and Coal India would be bound to comply with any directions.

The main difference that has happened now is that the power department is considering providing us with a list of power projects which will be taken up in the 12th plan and to freeze that list so that everybody is clear about how much is to be supplied. Then the quantity that is available could be distributed amongst the companies which are actually likely to come up during the 12th plan, so accordingly Coal India would be supplying and FSAs would be concluded.

Q: Given that Coal India is already struggling to meet your own targets, how do you find the additional capacity which is required right now? Also, are you are in a position to get it across to the power companies, are logistic supportive for that?

A: To bridge the gap between demand and supply, we would of course be trying to set up the production. This can be done by just doing more out of what is already exposed where mining is ongoing and by taking up new projects.

The board in its last meeting approved Amrapali project which would give us another 15 million tonne. Materials and equipments have to be better utilized for better productivity, evacuation has to be improved for which we have taken up the matter with the railway board, the supply of wagons has been the best ever already and they have assured us about 10-12 rakes more uptill March at least, so evacuation would improve.

The railway infrastructure also is expected to improve; double lines as well as railway corridors are planned. These would be some of the steps and strategies to reduce the gap and we would also need to look at import and we would be studying how Coal India can do this quickly so as to bridge the gap.

Q: There are concerns that perhaps your e-auction limit may have to get curtailed now?

A: During the current fiscal up to January 2012, CIL has already undertaken spot auction of 37 million tonne of coal. Going by trend, we expect total e-auction would be around 45 million tonne during the year.

Now regarding supply to the power sector by way of e-auction, we did offer 4 million tonne to the power sector at a time when production was adversely affected due to unprecedented rainfall in second quarter, but the of take was not much. So we don't expect much diversion of e-auction quantity and so the quantity would remain the same as it was this year in the coming year as well.

Source :moneycontrol.com