In yet another consumer friendly step, Coal India Limited (CIL) has recently taken two major decisions for the benefit of its non-regulated sector (NRS) customers and independent power plants (IPPs) after the company’s board green flagged proposal towards ease of doing business in coal sector.
On request of the NRS customers the state owned coal mining company has extended the “letter of credit” facility allowing them the payment of coal value through irrevocable revolving letter of credit (IRLC) mode.
The facility would be implied for coal supplies made through rail mode under fuel supply agreements executed via linkage auctions, which hitherto was extended only to power generating companies. The decision would help NRS customers to run their plants smoothly as they won’t be required to pay 100% advance payment by blocking their money for long periods.
Earlier, significant amounts of money deposited by NRS customers against the coal value in rail mode was locked up in the form of advance and the same could not be utilized by them in the subsequent application of coal purchase. Apparently, CIL has attempted to ease off the hindrance with the introduction of the new norm.
During FY19 around 73 MnT of coal was supplied to NRS sector under FSA out of the total coal off-take of 608 MnT.
In a separate positive step that bodes well for IPPs, CIL has permitted inter-plant transfer of coal which allows coal transportation among the power stations provided they are wholly owned subsidiary or wholly owned by the common holding company. This facility was earlier confined to Central and State Gencos.
This means if an independent power generating entity owns two different plants and has two separate fuel supply agreement (FSA) in place, they can transfer coal from one plant to another plant, owned by them, to improve efficiency in generation and reduce the cost of coal. This would also reduce the transportation cost and take the load off on the railways during peak season.
The policy requires the plant who is transferring the coal, to provide an affidavit to CIL affirming that the additional coal supply beyond the ACQ (Annual Contract Quantity) would only be used for generating power for distribution under long term power purchase agreements with DISCOMs.
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