Coal India increases trigger level in FSAs with Power utilities

Kolkata: Coal India Limited (CIL), has increased the minimum assured commitment level of coal supply, ‘trigger level’, to 80% from the existing 75% of annual contracted quantity (ACQ) to its power sector consumers covered under fuel supply agreements (FSA) for 2020-21.

This is applicable for those FSAs where trigger level was pegged at 75%. The company’s Board has green flagged the proposal in its recently held meeting.

Coal companies of CIL have been advised for immediate implementation of the increase. The amendment to elevate the trigger level to 80% in the provisions of existing FSA shall be through a side agreement. “Raising the trigger level to 80% is targeted towards gencos requiring more coal” said a Coal India executive.

The aim is to encourage power plants to opt for increased domestic supply of coal and to steer them away from imports to the extent possible.

CIL’s FSAs with power utilities stand around 560 million tonnes (MTs). Of this, 270 MTs of FSAs belong to power plants commissioned prior to New Coal Distribution Policy regime whose trigger level was 90% of the ACQ. For those FSAs amounting to 290 MTs commissioned post NCDP the trigger level was 75% of the ACQ. Now, the post NCDP level is ramped up to 80% for 2020-21. Assuming all eligible power utilities agree for increase to 80% trigger level then FSAs for the ongoing fiscal could see a spike of over 14 MTs.

Abundant coal stock at an all-time high of 75 MTs 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% 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, CIL has stepped up many consumer friendly relief measures which include extension of time limit for payment of coal till 21 April 2020; 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 gencos and implementation of Usance letter of credit.

Source Article

Lois C. Ferrara

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