India to impose penalties for coal shortfalls

The Indian government has imposed a new payment structure for the country's coal mining monopoly that it hopes could help stabilize and improve supplies for its coal-fired power plants, according to Reuters.

Coal India has put pressure on the nation's coal-fired generation recently by consistently failing to meet its production targets, leading to instability on the grid and higher electricity costs.

To help encourage more consistent production, the Indian government has decided upon a new payment plan for contracts with new coal power plants that will penalize the company for failing to reach at least 80 percent of promised production. In that event, Coal India would be forced to compensate the coal power plants between 10 percent and 40 percent of the costs of the shortfall, depending on the extent to which it misses its targets.

At the same time, the company will see a comparable benefit for reaching at least 90 percent of promised production, providing some incentive to ramp up output.

While the new coal-fired generators will not be active until 2015, Reuters also reports that the industry is facing higher costs from a proposed 25 percent export tax on Indonesian coal.

Information on the looming coal shortage in India can be found at PennEnergy's Research area.

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