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http://www.reuters.com/article/2012/08/0....

Aug 7 (Reuters) - State miner Coal India agreed on Tuesday to pay penalties for failing to provide sufficient supplies to new Indian power projects that range from 1.5 to 40 percent of a shortfall, depending on the level of default.

It also agreed to pool the prices of imported coal with domestic supplies but said a final decision on this issue would be taken by the Central Electricity Authority. Such a pricing system would work only if all domestic consumers are willing to accept the resulting higher price, the company said...

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Coal India had stipulated that it may use a mix of up to 15 percent imported coal versus 65 percent domestic.

Coal India, the world's largest coal miner, produces nearly 80 percent of the country's domestic coal supply of about 550 million tonnes but has struggled to increase local supplies for years because of failure to get swift environmental and regulatory approval and inadequate railway infrastructure...

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"It's not very ominous. Obviously, it's more than they initially wanted, but we should also factor in that they are allowed to import coal to make up shortfall," said Murtuza Arsiwalla, a sector analyst with Kotak Securities.

The miner typically puts a 10 percent penalty clause in its fuel supply pacts with customers.

It prices domestic coal 45 to 70 percent below international prices, in part to keep costs low for power companies. Pooling prices would allow the cost of more expensive imports to be distributed to more customers.

Coal India plans to import 20 million tonnes in the current fiscal year ending March 2013 and 30 million tonnes in 2013/14, Rao said...