Coal India hikes fuel supply commitment level to power utilities to 80%

For the ongoing fiscal year, Coal India Limited (CIL) has increased the minimum assured commitment level of coal supply – called the trigger level – to 80 per cent from the existing 75 per cent of Annual Contracted Quantity (ACQ) to power sector consumers covered under Fuel Supply Agreements (FSA).

This is applicable for those FSAs for whom the trigger level was pegged at 75%. All the coal producing subsidiaries of CIL have been advised to immediately implement the increase.

The amendment to elevate the trigger level to 80 per cent in the provisions of existing FSA shall be through a side agreement.
“Raising the trigger level to 80 per cent is targeted towards power generating companies requiring more coal” said an official of the company.

“The aim is to encourage power plants to opt for domestic supply of coal and steer them away from imports to the extent possible”, the official added.

CIL's FSAs with power utilities stand at around 560 million tonne (mt). Of this, 270 mt of FSAs belong to power plants commissioned prior to New Coal Distribution Policy (NCDP) regime, whose trigger level was 90 per cent of the ACQ.

And for those FSAs amounting to 290 mt commissioned post NCDP the trigger level was 75 per cent of the ACQ which has now been increased to 80 per cent.

According to a CIL official, if all eligible power utilities agree for increase to 80 per cent trigger level, then FSAs for the ongoing fiscal year could see a spike of over 14 mt.

Coal stock is currently at an all-time high of 75 mt at pitheads, increased production planned for 2020-21, to assure more domestic coal to the power plants operating on higher level of plant load factor and to offer relief to the power sector during the Corona pandemic prompted the Maharatna coal mining monolith to increase the trigger level.

The coal companies shall be motivated to increase the level of delivery to the power plants as supplies less than the committed trigger level of 80 per cent shall attract payment of penalty for the quantity supplied less. Similarly, power generators shall also be motivated to increase the lifting of domestic coal under the FSA.

Amid the economic crisis created by Covid-19, Coal India has stepped up many consumer-friendly relief measures which include extension of time limit for payment of coal till April 21; extension of the validity period for lifting of coal under all auctions without any penalty; continuance of coal supplies despite payment defaults by Sate and Central generating companies and others.

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