NEW DELHI: India's prime minister ordered the country's state-run coal mining giant on Wednesday to guarantee 20 years of supplies to private power producers to help alleviate chronic energy shortages.
This is "a major step forward in solving the problems of power sector in the country and is likely to boost investors' confidence in India's power sector," Prime Minister Manmohan Singh's office said in a statement.
Singh pledged last month to move to ease endemic power shortages in the country of 1.2 billion people at a meeting with top executives from India's power sector as rising demand from industry and domestic users outstrips supply.
State-run Coal India, responsible for 80 percent of India's coal output, will sign 20-year fuel supply agreements with private power producers, Singh's office said, in a move intended to assure power producers of uninterrupted energy.
Shares of India's private power utilities jumped on the news of the long-term agreements. Tata Power climbed 6.0 percent to 110.45 rupees while Reliance Power soared nearly 13 percent to 122.55 rupees.
Last month, Tata Group Chairman Ratan Tata and Reliance Power Chairman Anil Ambani, complained to Singh that severe shortages of coal and natural gas were hampering the growth of power sector by leaving many power projects stranded.
Coal India, which is already struggling to boost output and meet its production target for this year, will have to supply the fuel even if its own stocks are insufficient and it has to import coal, the official statement said.
Until now, Coal India, based in the eastern city of Kolkata, has only signed five-year power supply contracts.
Coal India, the world's largest producer of the fuel, earlier in the week said its net profit jumped 54 percent in the financial third quarter to 40.4 billion rupees ($821 million) from a year ago, helped by higher coal prices.
The guaranteed supplies "will help in achieving power generation capacity targets" and to increase economic growth, the statement added.
Coal accounts for 55 percent of India's power generation capacity.
India has an installed power generation capacity of 187 gigawatts -- about 20 percent of China's level -- and a peak hour power shortage of around 12 percent.
The country's power troubles have been aggravated by lower-than-expected gas output from the Reliance Industries-operated main D6 block in the Krishna-Godavari basin, off India's east coast.
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