Union coal ministry came to know that many of the independent power producers (IPPs) who were allocated coal blocks by the government failed to sign power purchase agreements (PPAs) with power distribution companies.

Following this, the ministry directed eight states, through letter, to sign PPAs with power distribution companies. The ministry warned that if the states do not sign PPAs, their coal blocks would be de-allocated.

The ministry gave this direction to the states in its letter on August 26. The ministry asked IPPs to sign PPAs within 18 months from the date of issue of this directive failing which permission to mine the block may be withdrawn or suspended.  

Coal ministry made this direction to the states after holding extensive consultations with the law ministry.

Before executing a mining lease, the coal ministry asked state governments to follow this directive. State governments were also directed to impose this as an additional condition in case where a mining lease has already been executed.