22Coal India Ltd (CIL) may not sign fresh fuel supply agreements (FSA) for some time with customers who go back on the committed pacts and terminate existing contracts on “frivolous” grounds.
According to a press statement issued by CIL, the customers have paid premium for securing coal through auctions in the past without complaints. Now, during this Covid-induced slowdown when the demand is low and the floor prices are relatively lower, some of the customers are moving away citing reasons that are not sound.
“About the customers terminating supply contracts (FSAs) citing poor quality, grade slippage and transportation costs, we feel these are lame excuses. The company takes a serious cognizance of its coal quality. Merely saying that transportation costs are high is a frivolous reason to pull out, as customers willingly obtain linkage for road mode with full knowledge of the distances,” a senior company official said in the release.
Better quality & quantity
The company’s concentrated efforts on supply of improved quality coal over committed grades and supply beyond annual contracted quantity (ACQ) have paid off as it gained a tidy amount on the whole over these attributes.
Close to ₹1,365 crore provisioned under coal quality variance in the earlier years has been withdrawn in the last fiscal, which is a net gain to the company .
“CIL’s coal supplies, above agreed ACQ to its customers, having FSA, also netted the company a substantial amount of over ₹1,760 crore under performance incentive during the previous two fiscals combined. For 2019-20, the performance incentive earned was ₹875 crore, whereas the same was ₹888 crore during FY-19.
For enhanced transparency on coal quality front, CIL has a well-established third party sampling system covering all its customers. It has also appointed agencies such as Central Institute of Mining and Fuel Research (CIMFR) as independent consultant to test coal quality for power sector and Quality Council of India (QCI) for non-power sector.
Coal quality variance has come down and prices are charged in line with the actual grades of coal supplied to consumers. Credit or debit notes are issued in case of variation in grade, if any, and there is a redressal mechanism to settle these issues amicably.