Coal India in no position to offer supplier’s credit to consumers

KOLKATA: Coal India will not offer supplier’s credit to consumers including power companies but its board decided on Thursday to give other concessions.

On Thursday, the board decided to allow acceptance of usance credit by Coal India from almost all buyers, including some e-auction customer categories. It also passed the proposal to bring down floor prices for auctions that used to be 20-30% higher than notified price, to the notified price for each grade of coal on offer.

The fuel supplier, which caters to more than 70% of the country’s coal-fired power generation demand, has also relaxed rules for ‘usance credit’, which allows consumers a deferred payment option by paying service charge to banks. The bank would pay Coal India.

“We have offered all facilities under our control to help increase coal supplies. Consumers including power producers can now request the Centre or state governments to stand guarantor if they need to avail usance credit facilities in case they have credit worthiness issues or have used up their credit limits,” said a senior Coal India executive.

Coal India’s rules for usance credit included payment by banks within a day of supplies, failing which there was a penalty of 15%. On Thursday, the board raised the time limit to five days and reduced the penalty to 10%.

Power companies are, however, not satisfied and are asking for supplier’s credit facilities from Coal India since they are unable to take benefit of usance credit due to exhaustion of bank lending limits.

A Coal India executive said the company cannot meet this demand as dues from state power firms are already very high and risen sharply in the past two weeks, straining its cash flow. “If governments stand guarantors on their behalf the problem would be resolved,” he said. “Coal India’s dues increased by Rs 2000 crore during the first two weeks of the current month to touch Rs 15,000 crore.”

“At the board meeting, we have decided to extend usance facility to power consumers holding valid coal supply contracts, non-power consumers who have secured long-term supply contracts through auctions, special forward e-auction and exclusive e-auction customers,” the executive said. Spot e-auction consumers have not been covered yet.

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