India: SECL mandates financial coverage for coal quality upgradation under e-auction system

• SECL enforces stricter norms under CIL e-auction framework
• Buyers to face increased financial commitments upfront

South Eastern Coalfields Limited (SECL) has issued a notice making it mandatory for all e-auction buyers, as well as FSA and MoU consumers, to provide financial coverage (FC) towards the upgradation of coal quality under the updated Coal India Limited (CIL) e-auction Scheme 2022. This change takes effect from 1 October 2025, coinciding with the compulsory implementation of third-party or joint sampling for all coal despatches.

Key provisions of new directive

From October, all e-auction consumers, regardless of whether they opt for third-party sampling, will have to submit financial coverage for the possible upgradation of coal grades. The FC amount must cover the cost of up to three grade (+3) improvements on the sale order grade. This ensures that any quality upgradation determined through sampling analysis will already be financially backed by the buyer.

The financial coverage can be submitted in the form of cash or bank guarantee, in line with Clause 11.8.3 (vii) of the CIL e-auction Scheme 2022.

Buyers who have already booked coal in auctions before 9 September 2025, but whose sales orders are still pending, will need to deposit FC by 3 October. For running delivery orders, FC must be submitted against the balance quantity as of 1 October 2025.

Additionally, under Clause 11.8.4 of the scheme, buyers must provide an Indemnity Bond confirming that any payment shortfall arising from third-party sampling analysis will be cleared within two working days of SECL’s demand.

Implications for buyers

This move aims to reduce disputes over coal quality, ensure smoother settlements, and protect SECL’s financial interests. For consumers, however, it introduces stricter compliance and adds upfront financial commitments. The requirement to block cash or bank guarantees may strain liquidity, especially for smaller traders.

Out of CIL’s 781 mnt of coal production in FY’25, SECL alone contributed 167.5 mnt.