Coal India eases credit norms for firms in non-regulated sector

Our Bureau Kolkata | Updated on December 06, 2019

Companies in this sector will now get 10-15 days to make payment for coal purchases

Coal India, the world’s largest miner, plans to give 10-15 days credit period to companies operating in the non-regulated sectors such as steel, cement, and aluminium. These companies, which are called customers in Coal India parlance, had to make an upfront payment before despatch.

Previously, such credit facility was available only to power generating companies.

In 2018-19 around 73 million tonnes (mt) of coal was supplied to the non-regulated sector under fuel supply agreements (FSA) out of a total coal offtake of 608 mt.

“NRS customers are large in numbers and working capital blockage in coal movement by rail was, of late, found to have a bearing on their health. With the introduction of this relaxed norm NRS customers can breathe easy and this move will help in sustaining their growth as well,” a Coal India release said.

Earlier, a significant amount of money deposited by non-power sector consumers against coal despatched through rail mode was locked up in the form of advance and it could not be utilised by steel and other non-power companies in subsequent coal purchases.

Bank guarantee

Coal India added that under this new mechanism, consumers from non-regulated sector (NRS) have to furnish a bank guarantee of the amount of purchase and it has to be replenished from time to time. In this case, an Irrevocable Revolving Letter of Credit will be issued for coal supplies through rail mode and this can be used to avail credit.

The move comes in wake of the company registering a 7 per cent drop in coal offtake to 47.37 mt in November; against 51 mt the same period last year. Power generation has also dropped to 98,887 million units (MU) in October.

Inter-plant transfer

In a separate step, to help Independent Power Plants (IPPs), Coal India has allowed inter-plant transfer of coal. This will allow IPPs to transfer coal, if the plant is a wholly-owned subsidiary or wholly-owned by a common holding company. This facility was earlier restricted to Central and State Gencos.

According to the Coal India release, the move is expected to help an Independent Power Generating Entity that owns two different plants and has two separate FSA to now transfer coal from one plant to another plant, owned by them.

It will lead to improved efficiency in generation and reduce the cost of coal; it would also reduce transportation cost and take the load off Railways during peak season.

The transferee plant has to give an affidavit affirming that the additional supply beyond the annual contracted quantity of coal will be used for generating power under long-term agreements with Discoms.

Published on December 06, 2019

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