Coal Ministry's go-ahead for 100% supply to thermal power units by CIL

The ACQ has been increased to 70 per cent for coastal plants

Given the excessive coal stock available with Coal India (CIL), the ministry of coal has approved the company’s plan to supply 100 per cent of the normative requirement to thermal power units.

The ministry has recommended increasing the ‘annual contracted quantity’ (ACQ) of coal to 100 per cent of the normative requirement of a non-coastal plant. It was 90 per cent earlier. For coastal plants, the ACQ has been increased to 70 per cent.

Normative requirement is the coal demand of a thermal power station based on its capacity, heat rate, boiler specifications and subsequent coal usage. Normative requirements are different for every station. 

The decision of the coal ministry pertains to coal supply both under long-term agreement signed with CIL and coal supply linkage via the auction route. 

CIL periodically holds auction of coal for the power and non-power sectors for short-term and medium-term coal supply contracts.

“In view of the request by CIL and recommendations of the ministry of power, the standing linkage committee (of the ministry of coal) recommended to increase the ACQ up to 100 per cent of the normative requirement,” said the minutes of the meeting held this week.

The committee further said in case coal supply linkages are obtained through auction, the entitled quantity will be revised based on the new norms. Consumers will have to participate in auctions to obtain linkages for the increased entitlements of ACQ.

In the above mentioned meeting, the national miner said it has sufficient stock of coal and there is slugging demand from the non-regulated sector (such as iron and steel, among others) due to Covid-19. 

“CIL has decided to enhance the ACQ up to 100 per cent. This dispensation would be allowed to interested power plants on an optional basis. They will have to undertake that they would reduce import to the extent of increase in the ACQ,” said the company.

This is in line with the recent Centre’s directive to reduce coal import. Last month, CIL launched a special category e-auction of coal for those companies and traders which import coal to meet their requirements.

The company also informed the ministry that around 700 million tonnes of coal would be available with CIL in the current financial year. It further said that production from next financial year will be in accordance with the plans to achieve the 1 billion tonne coal production target by 2024.

“Further, the impact of enhancement of ACQ would be that around 15 million tonne more coal would be committed to power producers. It was stated that CIL has waived off the levy of performance incentive (PI) for the first two quarters of 2020-21. This would also enable it to implement the coal import substitution as coal quantities above the ACQ level can be supplied without charging additional cost in the form of PI,” CIL said.