<?xml version="1.0" encoding="UTF-8"?><root available-locales="en_US," default-locale="en_US"><static-content language-id="en_US"><![CDATA[<p>Embarrassed by CAG report on revenue losses to government on one hand and an UK-based hedge fund serving notice on government for alleged violations of international treaties related to its investments in Coal India Ltd, on the other, a hapless government tried to set its house in order on Thursday. <br><br>The beleagured Coal India board on Thursday approved the new draft fuel supply pact, but with riders, according to a government official. The Coal Ministry has also expedited the process for appointing CMD of the state-owned company.<br><br>A contentious clause in the model Coal India agreement with power generating firms, under which world's largest coal producer would commit itself to supply at least 80 per cent of the fuel to these users, is in the final stage of completion.<br><br>The board of directors of the Coal India Ltd (CIL) has been meeting for the last two days to resolve the issue, amidst reservations from some of the independent directors and legal threat from the UK-based hedge fund, TCI, which is a minority shareholder in the company.<br><br>"It (Fuel Supply Agreement) is in the final stages. There has been some technical problems and they are being addressed," Power Minister Sushilkumar Shinde told reporters in New Delhi on Thursday.<br><br>The Coal Ministry has been in the news following disclosure of a draft report of the Comptroller and Auditor General (CAG) which had pointed out that the government lost Rs 10.67 lakh crore on account of allotment of coal blocks to 100 private and public sector companies during 2004 to 2009.<br><br>Early this month, the coal ministry had said that was likely to issue show-cause notices to coal blocks holders, asking them to either start production or face deallocation.<br><br>The decision to issue show-cause notices to those sitting idle on captive coal blocks was taken by a panel looking into the development of reserves, sources said.<br><br>Concerned over the increasing demand supply gap, the coal ministry had in January reviewed the progress of mines allocated to companies, including Tata Steel , Coal India , SAIL and NTPC for captive use.<br><br>The progress of coal blocks allotted to firms, including Jindal Power, Jindal Steel & Power, BALCO and MMTC was also reviewed during the two-day meeting.<br><br>After meeting with the power sector honchos, Prime Minister's Office (PMO) had directed the CIL last month to ink FSAs with 80 per cent supply commitment before March-end for power plants which have been commissioned on or before December 31, 2011.<br><br>However, the PMO direction did not find favour with independent directors of the CIL, which is a listed and traded PSU. The minority shareholders also questioned the move. <br><br>Earlier, independent directors in the board meeting held on March 22 had resented a clause in the FSA for ensuring at least 80 per cent supply of the commitments to power plants.<br><br>The board had also met earlier twice over the past one week, but no consensus could be reached as there were disagreements over some of the clauses in the FSA.<br><br>The independent directors, according to sources, had opposed to the clause for ensuring at least 80 per cent supply of the commitments to the power plants stating that the PSU as facing problems in enhancing coal production and was not in a position to meet the commitment.<br><br>Amid power plants facing a supply crunch, the PMO had said that FSAs would be signed for full quantity of coal mentioned in the Letters of Assurance (LoAs) for a period of 20 years.<br><br>It had elaborated that if the supply remains below 80 per cent, then CIL would be penalised and would be provided incentives if it was found above 90 per cent.<br><br>In case, CIL is unable to meet the obligations, the company would have to arrange for fuel through imports or other arrangements, it had said. <br><br>On March 27, The government asked companies having captive coal mines to provide by month end the latest details of coal use, including reasons for delay in developing allocated reserves.<br><br>The latest move comes on the heels of Coal Ministry announcing to issue show-cause notices to those entities that are yet to develop allocated reserves to either begin production or face deallocation.<br><br>In a letter to all captive coal block allocatees and joint venture firms, the Coal Ministry said, "You are requested to send the detailed information for the quarter ending March 2012, in respect of allocated coal ... block and associated end use projects along with the reasons on delay in implementation of the coal ... project to this office by March 31, 2012."<br><br>"Reasons for delay in achieving the milestones of coal block projects as well as end use project may be furnished properly to frame a suitable reply to Ministry of Coal," the letter said.<br><br><strong>UK's TCI Serves Notice To Govt On Coal India</strong><br>British hedge fund The Children's Investment Fund Management served a notice to the Indian government on Wednesday for alleged violations of international treaties related to its investments in Coal India.<br><br>The latest salvo comes close on the heels of the UK hedge fund threatening to initiate legal action against the board members of state-run Coal India Ltd (CIL) for failing to protect the interest of minority shareholders.<br><br>"The Republic of India's recent conduct with respect to CIL has seriously impaired the business activities and operations of CIL and has contravened each of the treaties," The Children's Investment Fund (TCI) said in a letter to the Finance Ministry on March 27.<br><br>According to the letter, the Indian government's actions have breached the country's treaties with Cyprus as well as the UK and Northern Ireland, where the TCI's funds are domiciled.<br><br>TCI's investments in Coal India are through TCI Cyprus Holding Ltd and Talos Capital Ltd, which is registered in Ireland.<br><br>The hedge fund has said the letter was a "written notification of a dispute arising" out of breach of the two treaties.<br><br>Among the alleged violations cited in the letter are the government's direction that CIL price and sell coal under Fuel Supply Agreements (FSAs) at a substantial discount to international market rates.<br><br>TCI has also pointed out that government is "generally controlling and issuing directions to the company (CIL) in a manner which is abusive to minority shareholders".<br><br>It has requested for formal negotiations with Indian government on the issue for amicable settlement of the claims under the respective treaties.<br><br>"Failing such settlements within six months, we reserve our rights to initiate arbitration" in accordance with Cyprus and UK treaties, according to the letter.<br><br><strong>Govt Expedites Appointment Of Coal India CMD </strong><br>Amid concerns expressed by a UK- based minority investor over the functioning of Coal India (CIL), Coal Ministry has expedited the process for appointing CMD of the state-owned company.<br><br>The post has been lying vacant after Partha Bhattacharyya retired in February last year.<br><br>The Coal Ministry, according to a top official, has sent the proposal for appointment of a regular Chairman and Managing Director (CMD) to Appointment Committee of the Cabinet (ACC) for approval. The list of contenders include S S Narsing Rao, CMD of Singareni Collieries (SCCL).<br><br>"The Ministry has sent the proposal for appointment of CMD to ACC last Friday. The government will take a call soon", the official said.<br><br>The government has not able to fill the top slot in the state-owned coal major CIL after Bhattacharyya retired on February 28, 2011. Instead, it decided to give additional charge to N C Jha, director technical, CIL.<br><br>After Jha's retirement on January 31, 2012, the charge was given to Zohra Chatterji, Additional Secretary in the Coal Ministry.<br><br>(With Agencies)</p>