Coal India Ltd (CIL) has decided to retain the trigger level of 80% for the power sector under the fuel supply agreement (FSA) for another fiscal. The decision was taken at the annual board meeting held on 10 May ’21.
The latest decision is an extension of the previous provision of increasing the trigger level from 75% to 80% which was sanctioned as a preventive measure for the entire FY ’21. However, it has been clarified that being a bilateral agreement, the provision this time would not be mandatory, but optional for the coal consumers.
The trigger level, which indicates the minimum assured commitment level of coal supply against the annual contracted quantity (ACQ), would be applied across the power utilities having FSAs under the SHAKTI policy for the current fiscal.
Agreeing to the increased trigger level of 80% would require power plants to execute parallel agreements with the concerned coal company.
Besides, both the coal company and consumer would be subjected to penalty, if they fail to supply and lift the contract volume, respectively, as defined in the agreed norms.
Impact on supply dynamics:
The aim of this provision is to encourage power plants to opt for increased domestic coal supply and to steer them away from imports to the extent possible.
On the other hand, with an abundant pit-head coal stock of 87.18 million tonnes (mn t) accumulated at the end of Apr ’21, CIL would be keen to liquidate the excess inventory at a time when coal stocks at power plants are receding rapidly.
Coal stocks at the power plants fell by around 45% to 27.38 mn t as on 25 May ’21 compared to 49.98 mn t in the year-ago period, as per the data provided by the Central Electricity Authority (CEA).
Implementation of the revised trigger level is expected to boost CIL’s coal dispatches in the short-term. Nevertheless, the company has said that it would deliberate regarding further extension of the trigger level based on actual results and other related parameters.
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