Consumers' Page

Present Coal Scenario:

Buoyed by increased Industrial activities across all sectors and rising power demand, national miner Coal India’s production and offtake of the dry fuel has remained steady in August. Total production of CIL for the month was 42.6 MT, which was 14.6% higher than August ‘20. For the period of April ’21 to August ’21, CIL’s cumulative coal production has been 209.2 MT, more than 7% higher than the same period last year that was hit hard by the pandemic.

The Maharatna company has registered a total coal offtake of 48.60 MT which is slightly lower than last month but 9.5% higher than August last year. Considering the period of April ’21 to August’21, CIL’s total offtake has been 259.30 MT, nearly 50 MT more than the same period last year. This positive trajectory has certainly helped country’s coal sector to ensure uninterrupted supply of fuel and reduce coal imports.

Issues faced by Power Sector Consumers:

1. Soliciting dispensation for Case 2 Scenario 4 Power Plants under Section 63 of Electricity Act, 2003 to avail rationalisation of coal Linkages without any requirement of Supplementary Agreements:

As per CIL’s notification to certain IPPs which had submitted Expression of Interest (EoI) for availing the facility of linkage rationalization, the IPPs are required to sign a supplementary agreement approved by the appropriate Electricity Regulatory Commission with DISCOMs to pass on the entire benefit of actual cost saving.

However, IPPs which belong to Section 63, Case 2 Scenario 4 Power Plants established through a bidding process of Competitive Bidding Guidelines for determination of tariff for procurement of power by Distribution of Licensees for long term power procurement of the Electricity Act, 2003 raised concern over signing of the supplementary agreement.

As per the PPA, actual landed cost of coal is passed on by these IPPs to the State Discoms irrespective of source/grade of coal. Therefore, any savings due to this linkage rationalization would automatically get passed through as per the Energy Charges Formula under Schedule 7 of the PPA.

Request has been made to Ministry of Coal and Ministry of Power so that for the Case 2 Scenario 4 under Section 63 Power Plants, the Supplementary PPA is not required as the actual benefits/ cost savings acquired through rationalization of linkages would be passed on to the State Distribution Companies.

2. Submission regarding further deterioration in quality of coal supplied from Salanpur and Mugma area of ECL:

As per the Power sector consumers, quality of coal supplied from ECL Salanpur and Mugma sidings through Rail mode further deteriorated during MayJune ’21 as coal supplied from these two sidings were 6-7 grades lower than the declared grade.

Though one or two collieries under Salanpur and Mugma are producing better quality coal, supply from most of the other collieries from these two areas are of much lower grade containing of high amount of shale and other substances.

Request has been made to ECL and CIL to take necessary measures to improve the coal quality supplied from these two areas as Power producers procuring coal from ECL, largely depend on supply from these sidings.

3. Request for reimbursement of idle freight on account of under-loading alongwith GST:

Certain Subsidiary Coal Companies (CCL, NCL & ECL) are providing refund of idle freight alongwith GST components charged by the Railways to the Power Utilities but others such as SECL, MCL and WCL are not reimbursing the GST amount during refund of idle freight.

Request has been made to CIL so that all Subsidiary coal companies reimburse the idle freights for under-loading along with the GST amount.

4. Submission to SECL by the coal consumers for refund of huge coal value against lapsed quantities and EMD:

Despite the extension in coal lifting period till 20th July ’21, consumers from the Power sector could only manage to lift a portion of their allotted quantities while the remaining portion got lapsed due to various reasons like unavailability of declared grade of coal, adverse weather conditions for production of coal, less production of auctioned grade of coal due to geological disturbance which has caused massive amount of working capital of these companies in the form of coal value including Royalty, DMF, NMET etc. and EMD worth crores of rupees to be blocked due to Non- materialization of remitted amounts through refund.

Request has been made to SECL for refund the

coal value against lapsed quantity and EMD to the concerned customers at the earliest possible.

Issues faced by the Nonpower Sector Consumers:

5. Submission by NRS consumers requesting extension of the term of Tranche-I NRS Linkage Auction FSAs expiring in 2021:

As per CIL directive regarding expiring of FSAs under Tranche-I NRS Linkage auction in 2021 onwards on completion of initial term of 5 years, it has been notified that, NRS Linkage auction FSAs of Tranche-I of various sub-sectors will not be renewed after its initial term of five years.

However, clause 2.4 of the NRS Linkage Auction FSA states that there is a provision of extending the term of FSA upon the mutual agreement of both parties in writing.

There is an uncertainty in procuring coal of required quantity and quality from a particular source through competitive bidding in the next tranche of linkage auction and procuring through Exclusive auction often becomes difficult as the quantity offered is scanty in comparison to demand. Also, Offer by Rail through Exclusive auctions is insufficient and therefore disadvantageous for the plants situated at a long distance from the respective pithead while Price of imported coal is unviable for the industries.

Request has been made to MoC and CIL for provision of extending the FSA term through mutual consent of both parties (CIL and the NRS consumers) continuous supply of fuel to the Industries.

6. Appeal regarding urgent requirement of Tranche-V Linkage Auction for the rest of the Sub-sectors:

The Tranche-V of NRS Linkage Auction for the Sponge Iron sub-sector was conducted in December, 2019, Linkage Auction of Non-coking coal for the rest of the Sub-sectors under Tranche-IV, was last held way back in November- December, 2018.

This delay in conducting Tranche-V of NRS Linkage Auction for CPP, Cement and Others Sub- sectors has made the functioning of a large number of Industries extremely difficult due to uncertainty over long- term coal supply commitment.

Request has been made to CIL to conduct the Tranche-V of NRS Linkage Auction for rest of the Sub- sectors at the earliest possible and announce the tentative timeline for the Linkage auction well in advance so that the Industries may plan accordingly for long-term procurement of coal.

7. Request for expediting refund of Security Deposit against terminated FSAs:

Certain NRS Consumers procuring coal from different Subsidiaries have not been getting the refund of Security Deposit made by them against their FSA by Road Mode that has been terminated earlier this year.

Request has been made to CIL and the Subsidiaries for early release of the Security Deposit to the respective companies, againstthe expired FSAs.

8. Submission by NRS consumers procuring coal from WCL's Sasti OC for extension of DOs expiring in August '21:

Consumers from the Non-power Sector procuring coal from WCL through NRS Linkage Auction FSA are able to procure a small portion of their allotted quantity from Sasti OC as production of coal is stalled at the mine due to the ongoing rainy season.

As the FSA of these consumers are due to be expired soon, request has been made to WCL to extend the validity of DOs expiring within the third week of August '21 so that they can procure the allotted quantity as per the FSA.