The union government has asked the state-run, Coal India Ltd (CIL) to dilute a stiff penalty clause in the new coal supply agreements it is proposing to sign with power generation firms. The government is offering to accept a lower supply guarantee by the company.

Central Electricity Authority (CEA) had earlier approached the PMO for intervention over the opposition of some power units to the clause included in the fuel supply agreements (FSAs). The differences are over penalty that is to be paid by the coal major if it fails to supply 80 per cent of the contracted fuel to them. NTPC is among the companies that have refused to sign FSAs.

The coal ministry has been requested by the power producers association for incorporating changes in the new model fuel supply agreement. The power companies have now criticized the government's move to accept a lower supply guarantee from CIL, which almost has a monopoly on coal supply in the country.

CIL had recently said that it will be able to assure only 60 per cent of supply of coal to its customers and will gradually increase the figure to 80 per cent in the coming years. CIL said that the assurance of 80 per cent supply is not possible now and it can only guarantee 60 per cent supply. The state-run firm said that it would look to gradually increase the assured supply level to 80 per cent.

Coal Secretary S K Srivastava said a final decision on the matter would be taken by the Coal India board in its meeting next month.