FSAs for coal benefit neither Coal India nor public: TCI

Comments 0
SummaryTCI has estimated that if CIL sells its FSA coal at market price levels then its profits will increase by $19 billion (Rs 95,000 crore)

The Children’s Investment Fund Management (TCI), one of the largest minority shareholders of Coal India (CIL) has said that the fuel supply agreement (FSA) should be abolished or FSA coal prices be moved to market levels as the benefits are primarily taken by private companies and that the practice encourages corruption.

In a detailed presentation, ‘Cheap Coal Does Not Benefit The Indian People’ TCI said that 80 per cent of CIL’s coal is sold under FSAs at discounts up to 70 per cent to landed cost of comparative imported coal.

TCI has estimated that if CIL sells its FSA coal at market price levels then its profits will increase by $19 billion (Rs 95,000 crore).

“Government of India forces this system on CIL by arguing that it keeps steel, cement and power prices low for the benefit of all Indian people. However, often the benefits of artificially low coal prices are not passed on to the end consumers and some power companies keep the FSA benefits to themselves as they sell power under merchant power tariffs,” TCI said.

The London-based hedge fund that owned 1.01 per cent in CIL (as on March 31, 2012) has been writing to the company not to follow government instructions but to act independently and recognise that selling coal cheap and entering into prejudicial fuel supply agreements cannot benefit the public.

It said in the presentation that there is significant demand for FSAs coal as huge profits are available to companies buying discounted coal and added that there is a possibility of bribery in the whole system.

“Because huge free profits are available for the lucky firms obtaining FSAs, we believe it is highly likely that FSAs are awarded to those companies which are willing to pay bribes,” the fund said adding that CIL should not be punished for the sake of loss making state electricity boards, “which are highly inefficient”.

Ads by Google
Reader´s Comments
| Post a Comment
Please Wait while comments are loading...