PolicyPower producers refuse to sign supply agreements with Coal IndiaKaran- May 22, 2012There has been no resolution so far to the issue of assured fuel supply from Coal India Limited (CIL) to power producers.  According toreports, while CIL released a model supply agreement in April 2012, so far only around 13 Fuel Supply Agreements (FSAs) have been signed.  Originally around50power units were expected to sign FSAs with CIL.  Power producers have objected to the model FSA released by CIL, particularly itsforce majeureprovisions and the dilution of financial penalties in case of lower than contracted supply.BackgroundThe adverse power supply situation has attracted greater attention in the past few months.  According to Central Electricity Authority's data, the gap between peak demand and peak supply of power in March 2012 was11 per cent.  The decreasing availability of fuel has emerged as a critical component of the worsening power supply situation.  As of March 31, 2012, there were32 critical thermal power stationsthat had a coal stock of less than 7 days.  The gap between demand and supply of coal in the past three years is highlighted below: Table 1: Coal demand/Supply gap(In millions of tonnes)2009-102010-112011-12Demand604656696Supply514523535Gap90133161Source:PIBNews Release dated May 7, 2012  Coal accounts for around56 per centof total installed power generation capacity in India.  Increased capacity in thermal power has also accounted for almost81 per centof the additional 62,374 MW added during the 11thPlan period.  Given the importance of coal in meeting national energy needs, the inability of CIL to meet its supply targets has become a major issue.  While the production target for CIL was486 MTfor 2011-12, its actual coal production was436 MT.Fuel Supply AgreementsIn March 2012, thegovernment asked CIL to sign FSAswith power plants that have been or would be commissioned by March 31, 2015.  These power plants should also have entered into long term Power Purchase Agreements with distribution companies.  After CIL did not sign FSAs by the deadline of March 31, 2012 the government issued aPresidential Directiveto CIL on April 4, 2012 directing it to sign the FSAs.  The CIL board approved a model FSA in April 2012, which has not found acceptance by power producers. According to newspaper reports, many power producers have expressed their dissatisfaction with the model FSA released by CIL.  They have argued that it differs from the 2009 version of FSAs in some major ways.  Theseinclude:The penalty for supplying coal below 80 per cent of the contracted amount has been reduced from 10 per cent to 0.01 per cent.  The penalty will be applicable only after three years.The new FSA has extensiveforce majeureprovisions that absolve CIL of non-supply in case of multiple contingencies – including equipment breakdown, power cuts, obstruction in transport, riots, failure to import coaldue to“global shortage or delays… or no response to enquiries (by CIL) for supply of coal.”CIL would have the discretion to annually review the supply level that would trigger a financial penalty.  There was no provision for such a review in the earlier FSA.Most power producers, including NTPC, the country’s biggest power producer, have refused to sign the new FSA.Reportssuggest that the Power Minister has asked the Prime Minister’s Office to mandate CIL to sign FSAs within a month based on the 2009 format.  CIL hasreceived a requestfrom NTPC to consider signing FSAs based on the same parameters as their existing plants, but with the revised trigger point of 80 per cent (down from 90 per cent earlier). Underlying this situation is CIL’s own stagnating production.  Variousexpertshave pointed to the prohibition on private sector participation in coal mining (apart from captive projects) and the backlog in granting environment and forest clearances as having exacerbated the coal supply situation.ParliamentFirst no-confidence motion of the 17th Lok Sabha discussed todayNiranjana Menon- August 8, 2023Discussion on the first no-confidence motion of the 17thLok Sabha began today.  No-confidence motions and confidence motions are trust votes, used to test or demonstrate the support of Lok Sabha for the government in power.  Article 75(3) of the Constitution states that the government is collectively responsible to Lok Sabha.  This means that the government must always enjoy the support of a majority of the members of Lok Sabha.  Trust votes are used to examine this support.  The government resigns if a majority of members support a no-confidence motion, or reject a confidence motion.So far, 28 no-confidence motions (including the one being discussed today) and 11 confidence motions have beendiscussed.  Over the years, the number of such motions has reduced.  The mid-1960s and mid-1970s saw more no-confidence motions, whereas the 1990s saw more confidence motions.Figure1: Trust votes in ParliamentNote: *Term shorter than 5 years; **6-year term.Source: Statistical Handbook 2021, Ministry of Parliamentary Affairs; PRS.The no-confidence motion being discussed today wasmovedon July 26, 2023.  A motion of no-confidence is moved with the support of at least 50 members.   The Speaker has the discretion to allot time for discussion of the motion.  TheRules of Procedurestate that the motion must be discussed within 10 days of being introduced.  This year, the no-confidence motion wasdiscussed13 calendar days after introduction.  Since the introduction of the no-confidence motion on July 26, 12 Bills have been introduced and 18 Bills have been passed by Lok Sabha.  In the past, on four occasions, the discussion on no-confidence motions began seven days after their introduction.  On these occasions, Bills and other important issues were debated before the discussion on the no-confidence motion began.Figure2: Members rise in support of the motion of no-confidence in Lok SabhaSource: Sansad TV, Lok Sabha, July 26, 2023; PRS.Figure3: Number of days from introduction to discussion on no-confidence motionsNote: Number of days implies calendar days.Source: Statistical Handbook 2021, Ministry of Parliamentary Affairs; PRS.On average, no-confidence motions (excluding the one being discussed today) have been discussed for 13 hours over three days.  Discussions have lasted longer than 20 hours on four instances, most recently in 2003.  Today’s no-confidence motion was allotted 12 hours discussion time by theBusiness Advisory Committee.Following the discussion, the motion is put to vote.  26 out of 27 no-confidence motions (excluding the one being discussed today) have been voted upon and rejected.  This means that no government has ever had to resign following a vote of no-confidence.   On one occasion, in 1979, the discussion on a no-confidence motion against the Morarji Desai government remained inconclusive.  He resigned before the motion was put to vote.  50% of all no-confidence motions (14 out of 28) were discussed between 1965 and 1975.  Of these, 12 were against governments headed by Indira Gandhi.Figure4: Duration of discussion on no-confidence motionsNote: This graph excludes the no confidence motion moved on July 26, 2023.Source: Statistical Handbook 2021, Ministry of Parliamentary Affairs; PRS.In comparison, confidence motions have a more varied history.  The first motion, brought in 1979 to demonstrate confidence in Charan Singh’s government, was not discussed at all.  The Prime Minister resigned before the discussion could take place.  Since then, 11 confidence motions have been discussed in Lok Sabha, with nine occurring in the 1990s.  During this period, several coalition governments were formed, and Prime Ministers sought to prove their majority throughconfidence motions.   These motions have been discussed, on average, for 12 hours over two days.Figure5: Duration of discussion of confidence motionsSource: Statistical Handbook 2021, Ministry of Parliamentary Affairs; PRS.Of the 11 confidence motions discussed in Lok Sabha, seven were accepted.  On three instances, governments had to resign as they could not prove that they had the support of the majority.  On one instance in 1996, the motion was not put to vote.  Following an eleven-hour discussion on this confidence motion, Prime Minister Atal Bihari Vajpayee announced his intention to resign on the floor of the House.  He resigned 16 days into his term.Vajpayee became Prime Minister again in 1999, and faced another confidence motion.   This time, it was put to vote.   The motion was defeated by a margin of one vote.  This has been the closest result on a trust vote in the history of Lok Sabha.  The next closest result was when a motion of no-confidence against P V Narasimha Rao’s government was defeated by 14 votes in 1993.  In most cases, results have been in favour of the government by a large margin.«12345678910»
PolicyPower producers refuse to sign supply agreements with Coal IndiaKaran- May 22, 2012