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Coal India Seeks More Time to Sign Supply Accords Amid Shortage

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March 30 (Bloomberg) -- Coal India Ltd., the world’s largest producer of the commodity, said it wants more time to sign supply agreements with power utilities, missing a government deadline aimed at easing fuel shortages.

“We are going to seek some more time from the government to complete the process of signing the fuel supply agreements,” Coal India Chairman Zohra Chatterji told reporters in New Delhi today. “There is a disagreement in the board on the 80 percent trigger level and deliberations are on to find the quickest possible solution.”

The government had given Coal India until March 31 to sign the agreements with utilities in Asia’s second-fastest growing major economy, with a penalty for not meeting the minimum supply level. A group of industrialists who stalled plans to spend $36 billion on building power plants met Prime Minister Manmohan Singh in January and urged him to take steps to reduce fuel shortages.

“Coal India isn’t in a position to supply a minimum of 80 percent of the contracted quantity as the company is struggling to increase volumes,” said Bhavesh Chauhan, an analyst with Angel Broking Ltd. in Mumbai. “If the trigger level comes down, it will be positive for Coal India as chances of it paying penalties will be reduced, although the improving sentiment in the power sector will also begin to sour.”

Coal India gained 2.2 percent to 339.95 rupees as of 1:44 p.m. in Mumbai trading. The stock has climbed 13 percent this year, compared with a 12 percent increase in the benchmark Sensitive Index.

Board Disagreement

The board of the state-owned company, which met over the past two days, hasn’t agreed on the minimum supply clause, a government official said yesterday, declining to be identified because he wasn’t authorized to comment on the matter. The company was to submit a fresh assessment of the agreement to the coal ministry today, the official said.

The government ordered Coal India on Feb. 15 to sign the supply agreements with power plants and import the fuel if needed. The mining company hasn’t signed accords since April 2009, saying it could provide only 50 percent of the requirements of utilities.

Coal production has been curbed by heavy rains, delayed land acquisition approvals and environmental curbs on operating and starting new mines. The shortage has been exacerbated by a lack of trucking and reliable railway networks to transport coal.

The fuel supply agreements are intended to benefit power plants with a capacity of 50,000 megawatts. The nation had 192,792 megawatts installed as of yesterday, the government said in a statement.

To contact the reporter on this story: Rajesh Kumar Singh in New Delhi at rsingh133@bloomberg.net

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net

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