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BW Businessworld

Crime And Punishment

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Despite the presidential directive, Coal India (CIL) has missed its deadline for signing the fuel supply agreements (FSA) with power companies. And CIL has set a negligible penalty of 0.01 per cent (on the basic value of the shortfall amount) for itself, against 10 per cent that was originally proposed.

Why did CIL get to decide its own penalty? The government, not CIL, should have decided it. To meet fulfil the 20,000-MW FSA commitment, CIL needs to ramp up production by 70 million tonnes. Failing to supply the entire quantity would hit CIL's revenues by less than Rs 1 crore, say estimates.

The government of course needs CIL to supply coal at low rates to power companies. But, who would have been the loser if the coal miner were to pay a much higher penalty? It's the government, which holds 90 per cent stake in CIL.
Talk about running with the hares and hunting with hounds.

STRICTLY BUSINESS
Argentina has taken over YPF, the biggest oil company in South America, ousting Spanish group Repsol as majority shareholder. Following this, Spain has threatened the country with economic sanctions.

(This story was published in Businessworld Issue Dated 30-04-2012)