India: CIL extends FSA for state-nominated agency to 5 years

State-run miner Coal India Ltd (CIL) has decided to supply coal under fuel supply agreements (FSA) to the State Nominated Agency (SNA) for an extended period of 5 years.

Earlier, the tenure of coal supply under this provision was for a maximum of 2 years, depending upon the period for which the nomination was made by the state government.

It is to be noted that CIL carries out coal supplies via FSA which is a long-term contract governed by legally enforceable agreements between the seller (coal companies) and the consumer under specific terms and conditions.

These FSAs are majorly executed by coal-fired power plants and other large-scale industries which require an uninterrupted coal supply to run their operations.

However, various states are entitled to avail the FSA facility through SNAs so as to meet the requirements of the small and medium sector.

Such SNAs receive coal through FSAs in order to satiate requirements of the customers whose consumption is less than 4,200 tonne per annum and who otherwise do not have any access to purchasing coal or signing FSAs.

Introducing another modification in the FSA meant for the SNA, CIL has directed its subsidiaries not to carry forward coal allotments against the quantities that have not been lifted under paid orders.

Eventually, in the event of any scheduled quantity not getting lifted within the stipulated period of 90 days from the sale order, the customer would be entitled to receive refund of payment for the coal quantity.

Moreover, bringing in transparency in the allotment process, the miner has ordered a detailed record to be maintained comprising of unit-wise coal transaction along with prices. Such information is to be furnished by the end of the month, failing which coal booking would not be accepted.

During FY2022, CIL’s coal sales via FSAs were at 540.21 million tonne (mnt), accounting for around 83% of the total raw coal supplies. The FSA volume marked a rise of 16% y-o-y from 466.38 mnt in FY2021, indicating a steep recovery in coal demand post-Covid induced slowdown.