Coal news and updates

No CIL premium on excess supplies of higher grades

Saddled with nearly 58 million tons of pithead vendible stocks and in an attempt to liquidate the same, Coal India Ltd (CIL) has decided not to charge a premium on the higher grades (G5 and above) from its consumers for supply of more than 90% of the agreed quantity as per the fuel supply agreements (FSA), a company official said.

“The decision was taken to give relief to consumers and also to increase the marketability of higher grades at the current price, which was found to be higher than the price of the same grades of imported coal,” the official said.

Meanwhile, in a filing to stock exchanges today (on April 12), the company said that its board, on February 12, had accorded approval for giving up performance incentives for supply of higher grades of coal (G5 and above) in the model FSA to power and non-power consumers with immediate effect.

“This decision was taken due to a fall in international coal prices, improved supply of coal by CIL and a sluggishness in coal demand in general and the higher grades of coal in particular,” the company said in the filing.

CIL was facing difficulties in selling its higher grades for the past nearly 18 months because of higher prices as compared to imported coal, industry sources claimed.

Such higher grades are mined mainly in the CIL subsidiaries of Eastern Coalfields Ltd (ECL) and Bharat Coking Coal Ltd (BCCL), while some quantities of such grades are also produced in subsidiaries like South Eastern Coalfields Ltd (SECL) and Northern Coalfields Ltd.

CIL currently charges a premium ranging between 10% and 40% on excess supply of coal against FSAs. It charges a premium of 10% over the notified price of coal if the total coal supply is between 90 and 95% of the FSA. The premium rose to 20% in case of supplies above 95% and up to 100% of the agreed quantity; and further to 40% above the notified price in case of supplies rising above 100% of the FSA.

Explaining the decision, the official said, “The company was till now charging a premium, depending on the percentage of the excess quantity supplied to a consumer but, henceforth, it will charge a premium only on lower grades of such excess supplies and there will be not be any premium on supply of G5 and higher grades of coal.”

Giving an example, the official said, in case it is found that company has supplied a total of say 95,000 tons of coal to a consumer which is 95% of agreed quantity under FSA and in that 95,000 tons if the supply of higher grades i.e., G5 and above, is say about 20,000 tons, then in that case it will not charge the premium of 10% over and notified price of coal on that 20,000 tons additional supply.