There has been no resolution so far to the issue of assured fuel supply from Coal India Limited (CIL) to power producers.  According to reports, while CIL released a model supply agreement in April 2012, so far only around 13 Fuel Supply Agreements (FSAs) have been signed.  Originally around 50 power units were expected to sign FSAs with CIL.  Power producers have objected to the model FSA released by CIL, particularly its force majeure provisions and the dilution of financial penalties in case of lower than contracted supply. Background The adverse power supply situation has attracted greater attention in the past few months.  According to Central Electricity Authority's data, the gap between peak demand and peak supply of power in March 2012 was 11 per cent.  The decreasing availability of fuel has emerged as a critical component of the worsening power supply situation.  As of March 31, 2012, there were 32 critical thermal power stations that had a coal stock of less than 7 days.  The gap between demand and supply of coal in the past three years is highlighted below: Table 1: Coal demand/Supply gap (In millions of tonnes)

 

2009-10

2010-11

2011-12

Demand

604

656

696

Supply

514

523

535

Gap

90

133

161

Source: PIB News Release dated May 7, 2012 Coal accounts for around 56 per cent of total installed power generation capacity in India.  Increased capacity in thermal power has also accounted for almost 81 per cent of the additional 62,374 MW added during the 11th Plan period.  Given the importance of coal in meeting national energy needs, the inability of CIL to meet its supply targets has become a major issue.  While the production target for CIL was 486 MT for 2011-12, its actual coal production was 436 MT. Fuel Supply Agreements In March 2012, the government asked CIL to sign FSAs with power plants that have been or would be commissioned by March 31, 2015.  These power plants should also have entered into long term Power Purchase Agreements with distribution companies.  After CIL did not sign FSAs by the deadline of March 31, 2012 the government issued a Presidential Directive to CIL on April 4, 2012 directing it to sign the FSAs.  The CIL board approved a model FSA in April 2012, which has not found acceptance by power producers. According to newspaper reports, many power producers have expressed their dissatisfaction with the model FSA released by CIL.  They have argued that it differs from the 2009 version of FSAs in some major ways.  These include:

  • The penalty for supplying coal below 80 per cent of the contracted amount has been reduced from 10 per cent to 0.01 per cent.  The penalty will be applicable only after three years.
  • The new FSA has extensive force majeure provisions that absolve CIL of non-supply in case of multiple contingencies – including equipment breakdown, power cuts, obstruction in transport, riots, failure to import coal due to “global shortage or delays… or no response to enquiries (by CIL) for supply of coal.”
  • CIL would have the discretion to annually review the supply level that would trigger a financial penalty.  There was no provision for such a review in the earlier FSA.

Most power producers, including NTPC, the country’s biggest power producer, have refused to sign the new FSA.  Reports suggest that the Power Minister has asked the Prime Minister’s Office to mandate CIL to sign FSAs within a month based on the 2009 format.  CIL has received a request from NTPC to consider signing FSAs based on the same parameters as their existing plants, but with the revised trigger point of 80 per cent (down from 90 per cent earlier). Underlying this situation is CIL’s own stagnating production.  Various experts have pointed to the prohibition on private sector participation in coal mining (apart from captive projects) and the backlog in granting environment and forest clearances as having exacerbated the coal supply situation.

In a landmark judgment on April 12, 2012, the Supreme Court upheld the constitutional validity of the provision in the Right to Education Act, 2009 that makes it mandatory for all schools (government and private) except private, unaided minority schools to reserve 25% of their seats for children belonging to “weaker section and disadvantaged group”.  The verdict was given by a three-judge bench namely Justice S.H. Kapadia (CJI), Justice Swatanter Kumar and Justice K.S. Radhakrishnan.  However, the judgment was not unanimous.  Justice Radhakrishnan gave a dissenting view to the majority judgment. According to news reports (here and here), some school associations are planning to file review petitions against the Supreme Court order (under Article 137 of the Constitution, the Supreme Court may review any judgment or order made by it.  A review petition may be filed if there is (a) discovery of new evidence, (b) an error apparent on the face of the record, or (c) any other sufficient reason). In this post, we summarise the views of the judges. Background of the petition The 86th (Constitutional Amendment) Act, 2002 added Article 21A to the Constitution which makes it mandatory for the State to provide free and compulsory education to all children from the age of six to 14 years (fundamental right).  The Parliament enacted the Right of Children to Free and Compulsory Education Act, 2009 to give effect to this amendment. The Act provides that children between the ages of six and 14 years have the right to free and compulsory education in a neighbourhood school.  It also lays down the minimum norms that each school has to follow in order to get legal recognition.  The Act required government schools to provide free and compulsory education to all admitted children. Similarly, aided schools have to provide free and compulsory education proportionate to the funding received, subject to a minimum of 25%. However, controversy erupted over Section 12(1)(c) and (2) of the Act, which required private, unaided schools to admit at least 25% of students from SCs, STs, low-income and other disadvantaged or weaker groups.  The Act stated that these schools shall be reimbursed for either their tuition charge or the per-student expenditure in government schools, whichever is lower.  After the Act was notified on April 1, 2010, the Society for Unaided Private Schools of Rajasthan filed a writ petition challenging the constitutional validity of this provision on the ground that it impinged on their right to run educational institutions without government interference. Summary of the judgment Majority The Act is constitutionally valid and shall apply to (a) government controlled schools, (b) aided schools (including minority administered schools), and (c) unaided, non-minority schools.  The reasons are given below: First, Article 21A makes it obligatory on the State to provide free and compulsory education to all children between 6 and 14 years of age.  However, the manner in which the obligation shall be discharged is left to the State to determine by law.  Therefore, the State has the freedom to decide whether it shall fulfill its obligation through its own schools, aided schools or unaided schools.  The 2009 Act is “child centric” and not “institution centric”.  The main question was whether the Act violates Article 19(1)(g) which gives every citizen the right to practice a profession or carry out any occupation, trade or business.  However, the Constitution provides that Article 19(1)(g) may be circumscribed by Article 19(6), which allow reasonable restriction over this right in the interest of the general public.  The Court stated that since “education” is recognized as a charitable activity [see TMA Pai Foundation vs State of Karnataka (2002) 8 SCC 481] reasonable restriction may apply. Second, the Act places a burden on the State as well as parents/guardians to ensure that every child has the right to education.  Thus, the right to education “envisages a reciprocal agreement between the State and the parents and it places an affirmative burden on all stakeholders in our civil society.”  The private, unaided schools supplement the primary obligation of the State to provide for free and compulsory education to the specified category of students. Third, TMA Pai and P.A. Inamdar judgments hold that the right to establish and administer educational institutions fall within Article 19(1)(g).  It includes right to admit students and set up reasonable fee structure.  However, these principles were applied in the context of professional/higher education where merit and excellence have to be given due weightage.  This does not apply to a child seeking admission in Class I.  Also, Section 12(1)(c) of the Act seeks to remove financial obstacle.  Therefore, the 2009 Act should be read with Article 19(6) which provides for reasonable restriction on Article 19(1)(g).  However, the government should clarify the position with regard to boarding schools and orphanages. The Court also ruled that the 2009 Act shall not apply to unaided, minority schools since they are protected by Article 30(1) (all minorities have the right to establish and administer educational institutions of their choice).  This right of the minorities is not circumscribed by reasonable restriction as is the case under Article 19(1)(g). Dissenting judgment Article 21A casts an obligation on the State to provide free and compulsory education to children of the age of 6 to 14 years.  The obligation is not on unaided non-minority and minority educational institutions.  Section 12(1)(c) of the RTE Act can be operationalised only on the principles of voluntariness, autonomy and consensus for unaided schools and not on compulsion or threat of non-recognition.  The reasons for such a judgment are given below: First, Article 21A says that the “State shall provide” not “provide for”.  Therefore, the constitutional obligation is on the State and not on non-state actors to provide free and compulsory education to a specified category of children.  Also, under Article 51A(k) of the Constitution, parents or guardians have a duty to provide opportunities for education to their children but not a constitutional obligation. Second, each citizen has the fundamental right to establish and run an educational institution “investing his own capital” under Article 19(1)(g).  This right can be curtailed in the interest of the general public by imposing reasonable restrictions.  Citizens do not have any constitutional obligation to start an educational institution.  Therefore, according to judgments of TMA Pai and PA Inamdar, they do not have any constitutional obligation to share seats with the State or adhere to a fee structure determined by the State.  Compelling them to do so would amount to nationalization of seats and would constitute serious infringement on the autonomy of the institutions. Rights guaranteed to the unaided non-minority and minority educational institutions under Article 19(1)(g) and Article 30(1) can only be curtailed through a constitutional amendment (for example, insertion of Article 15(5) that allows reservation of seats in private educational institutions). Third, no distinction can be drawn between unaided minority and non-minority schools with regard to appropriation of quota by the State. Other issues related to the 2009 Act Apart from the issue of reservation, the RTE Act raises other issues such as lack of accountability of government schools and lack of focus on learning outcomes even though a number of studies have pointed to low levels of learning among school children.  (For a detailed analysis, please see PRS Brief on the Bill).