The government through inter-ministerial task force has approved a new methodology for rationalization of coal linkage.
The provision earlier notified by CIL was limited for transferring the coal linkages within power stations, but under the new reform it has been further expanded for the non-power sector in order to ease the evacuation constraints and bring down the landed cost of coal.
Besides, it would also allow swapping of imported coal with domestic coal, with the former being transported to hinterland and the latter supplied to the coastal areas.
Various modalities involved in the methodology has been discussed below:
Eligibility criteria:
1. The provision would be implemented across coal consumers from public as well as private sector. However, it would only facilitate transfer within the same sector viz. NRS (non-regulated sector) with NRS and power (regulated sector) with power, due to price variation in the two sectors as well as the difference in priority in movement of coal.
2. The arrangement is applicable to non-coking coal; coking coal does not fall within the ambit of the proposed methodology.
3. One of the participants availing this facility must have domestic non-coking coal linkage. The arrangement is not applicable between two imported coal consumers.
4. Coal procured from the various e-auction schemes viz. spot, forward, special forward, etc. and mined from captive blocks are not be eligible in the scheme.
Price offset clause:
An appropriate price offset clause has been set in the arrangement to prevent coal swapping where there is huge difference in price associated with the linkage quantity. Such a clause would be essential in case any consumer with a linkage from WCL enters into the rationalization scheme with a linkage holder from any other subsidiary of CIL.
In addition, it was notified that no change in commercial terms of FSA contracts, and the existing linkage holder would continue to pay the price of quantity being transferred in accordance with the terms of the existing deal.
Other important aspects:
1. Consumer having multi-grade coal supplies under FSA: In this case, the weighted average of actual coal grades supplied during the 12 months immediately proceeding the month in which the application was submitted, would be considered for rationalization.
2. Dispatch via rail mode: consumers taking through coal through rail have been allowed to participate in the scheme, under the condition that actual railway receipts would be considered for calculation of existing cost of transportation, while excluding shipping freights, port and handling charges.
3. Quantity involved: The ministry has highlighted that there would be no minimum quantity, for entering the arrangement, which is subject to restriction pertaining to the mode of transportation, if any.
However, maximum volume would be the entitled quantity calculated as:
(a) For linkage holders: The underlying volume in Annual Contracted Quantity (ACQ) as defined under the Fuel Supply Agreement (FSA).
(b)For Imported coal consumers: The assessed quantity would be the lower of (a) normative coal requirement of the EUP of the consumer less the ACQ under any existing linkage, and, b) the 12 month average of actual quantity of coal imported during the last 36 months preceding the date of submission of application.
In case of power sector consumers importing coal, the normative requirement would be computed based on applicable CEA norms. On the other hand, for NRS consumers importing coal, the requirement would be computed as per the methodology implemented during the auction of coal linkages.
4. Tenure: The minimum tenure of the arrangement has been affixed six months, but a participant can opt to terminate the arrangement, providing a notice period of three months.
The maximum tenure has been defined under following conditions:
(a) In case of two linkage holders, the validity would be the lesser of the remaining tenures of the two FSAs.
(b) When a plant which is importing coal is one of the participants, the provision would be valid up to the tenure of FSA of the other participant.
(c) In the event of extension of the tenures of the FSAs of both the participants, the arrangement may continue till the tenure of the FSA which is maturing earlier.
Objective
The ministry has initiated the provision with the sole aim of reducing the transportation cost associated with coal for the both parties agreeing to the arrangement.
In case of power sector, the saving accruing on account of the arrangement, are to be reflected in cost of power generated and would be passed on to the respective Discoms. Whereas, in case of non-power sector, the savings would be passed on to the railways.
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