CIL eases norms for coal supplies to non-regulated customers

State-run Coal India Limited (CIL) on Friday said it has relaxed norms for supplying the fuel to its customers of non-regulated sector by extending "letter of credit" to them and allowing an independent power producer (IPP) to transfer coal from one plant to another.

With the credit facility, non-regulated customers from steel, sponge iron, cement, aluminium, MSMEs and IIPs need not to make 100 per cent advance payment for coal and this will enable them to run their plants smoothly, a CIL official said.

"CIL is extending the letter of credit facility to non-regulated customers, allowing them to pay coal value through Irrevocable Revolving Letter of Credit (IRLC) mode for supplies through rail mode under fuel supply agreements executed through linkage auctions," a statement said.

This facility hitherto was extended only to power generating companies, the official said, adding that this is in "pursuance of government's initiatives towards ease of doing business in coal sector".

Customers of non-regulated sector are large in numbers and blockage of working capital in coal movement through railways was, of late, found to have a bearing on their financial health, the miner said.

Earlier, significant amounts of money deposited by these customers against the coal value for transporting through railways were "locked up in the form of advance", it said.

During 2018-19, around 73 million tonne of coal was supplied to the non-regulated sector under fuel supply agreement, out of a total coal off-take of 608 million tonne.

In a separate initiative, IPPs have been allowed for inter-plant transfer of coal.

This means if an independent power generating entity owns two different plants and has two separate fuel supply agreements (FSA) in place, they can transfer coal from one plant to another, owned by it, to improve efficiency in generation and reduce the cost of the fuel.

Coal behemoth said this facility was earlier confined to central and state power generating companies.

This would also reduce the transportation cost and take the load off the railways during peak season, the miner added.