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Power, fertiliser units get priority in coal policy
BS Reporter / New Delhi October 19, 2007
New coal distribution policy

* 100% of requirement assured to power and fertiliser units; 75% for others

* 8-fold increase in consumption limit of small & medium sector units, from 500 tonne per year to 4,200 tonne per year

* E-auction of coal to be reintroduced

* State govt  to play a larger role in coal allocation
 
Power and fertiliser sectors have been accorded top priority in a new coal distribution policy, which also does away with the earlier classification of consumers into core and non-core sectors.

As per the  policy announced today, power and fertiliser producers would get as much coal as required at pre-determined prices.

"Since power and fertiliser sectors are operating in a price regulatory regime, coal to the extent of 100% of the normative requirement of the units in these two sectors will be made by the coal companies as at present but only under Fuel Supply Agreements (FSAs)," a coal ministry release said.

Prior to signing a FSA, project developers will get a "Letter of Assurance’ (LoA) from the coal companies. Such LOAs will be converted into FSAs after specific milestones are achieved by the project promoters in a period of two years in case of power plants and one year in case of other consumers.

For large consumers other than power and fertilisers, with coal requirement of more than 4,200 tonne per annum, 75% of their normative requirement of coal would be provided under FSAs.

The policy has brought good news to small and medium sector consumers by raising the existing cap of 500 tonne of coal per year to 4,200 tonne per year. Initially, about eight million tonne of coal per year will be made available to meet their requirements.

The state governments will now have a larger role to play by identifying such consumers and arranging supply of coal to them through their designated agencies.

Consumers granted LoAs have to furnish a bank guarantee equivalent to 5% of their annual requirement of coal, which will be forfeited if the suggested milestones are not achieved within the stipulated period.

The bank guarantee system is being introduced to encourage only genuine consumers and prevent pre-emption of coal linkages without developing the end-use projects in time, the coal ministry release saud.

LoAs in case of power (including power utilities, IPPs and captive power plants), steel (including sponge and pig iron) and cement sectors will be granted by the Standing Linkage Committee (Long Term) functioning in the Ministry of Coal.

For all other consumers, LOAs will be issued by Coal India, the release said.

Under the new policy, Coal India will be at liberty to import coal to meet their supply commitments to various consumers and in such case necessary price adjustments will be made by the coal companies.

Under this policy, e-auction sale of coal will be re-introduced with certain modified features to encourage emergence of proper coal market in the country.

 
 
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