Consumers' Page

Present Coal Scenario:

Continuing with the trend of the last few months, India’s overall coal production in November ’22 has gone up to 75.87 MT which is nearly 12% higher than the same month previous year this is also 8.85 MT higher than October ’22. CIL’s production has also grown by 12.82% on a Y-o-Y basis. Country’s overall coal production so far this fiscal has registered more than 17% Y-o-Y growth.

In sync with the growth in production, India’s coal despatch is also on an upward trend. India has despatched 74.32 MT coal in November ’22 nearly 4.55 higher than November’21 and 10% more than the previous month. Amid despatch of coal to NRS, CPP and Steel sectors have witnessed year on year growth this month of 33% and 47% respectively, while supply to Cement, Sponge-iron and Others Sub-sectors have dipped. Country’s overall despatch in this financial year has grown by 7.45% Y-o-Y

Issue faced by both Power and NRS Consumers:

1. Consumers' views on Mode Agnostic Single-Window Auction:

The consumers have opined that the previous mode of auctions such as Special Forward eAuction for Power Sector, Exclusive e-Auction for the Non-power Sector and Spot e-Auction for all sectors including traders have been more apt and beneficial for both the parties compared to the new mode of auction to be introduced due to below mentioned reasons:

* Single window will bring in coal traders and consumers on the same auction platform which may lead to multiple disadvantages for the coal consumers as their coal procurement objectives are different from each other.

* For replenishing the shortfall of normative requirement, loss of heat value for grade slippage and running plants at higher PLF, TPPs have to source additional coal through auction. Sourcing coal over and above linkage quantity through single window auction is likely to be more expensive making the cost of power generation dearer.

*For running continuous process plants uninterrupted supply of coal is essential. But securing coal through single window auction will not ensure the required quantity of coal supply to the plants as unlifted quantity will lapse after 45 days in case of road mode and after three months in case of rail mode supply.

* In Single-window Mode-Agnostic auction, the default mode of supply is via rail. However, rake movement for the Non-power Sector has been extremely scarce over the last 8-9 months and sometimes tends to be nil from certain subsidiaries.

Request has been made to the Ministry of Coal and CIL that instead of introducing the new Mode Agnostic e-Auction scheme, the previous e-Auction schemes may be continued.

Issues Faced by Power Sector Consumers:

2. Submission by Power Sector Consumers requesting issuance of credit notes by CIL Subsidiaries against excess surface moisture in coal:

According to the terms of Agreement between the coal companies, consumers and the 3rd party sampling agency and as per provision of the FSA, coal companies are required to issue debit/credit notes for the cases where there is upgrade /downgrade from the declared grade of coal based on third-party sampling and analysis. Further there is a provision in the FSA for issuance of credit notes in case the monthly weighted average surface moisture in coal exceeds seven percent (7%) during the months from October to May and nine percent (9%) during the months from June to September.

Credit notes on account of higher surface moisture have not been issued by CIL subsidiaries. As per our valued members from the Power sector, huge amounts of credit notes in this regard are pending since the inception of 3rd party sampling in 2016.

Also, disbursement of credit notes worth crores of rupees by a number of CIL subsidiaries against grade slippage in coal supplied to the Power Sector are also pending for more than a year despite several appeals by the Utilities.

Request has been made to MoC and CIL so that so that issuance of credit notes against grade slippage and excess surface moisture may be expedited by CIL as it would provide a much needed respite to the coal consumers.

3. Submission by Power Sector Consumers seeking refund of differential GST amount alongwith reimbursement against idle freight uniformly by all CIL Subsidiaries:

It has been reiterated that while ECL and CCL

are providing refund against idle freight alongwith GST components charged by the Railways, Subsidiaries like MCL, SECL and WCL are not providing differential GST amount while providing reimbursement against underloading charges.

Request has been made to CIL repeatedly so that differential GST amounts may be refunded by the concerned coal companies while providing refund for underloading.

4. Submission by Power Sector Consumers on significant grade slippage from Gorandih-Begunia mines of Salanpur, ECL:

Power Sector consumers procuring coal from Gorandih-Begunia mines of Salanpur area of ECL were buying ROM coal of G8 grade, which was suitable for usage in power generation as most of the collieries in ECL otherwise has very high grade of coal. Since all other modes of eAuctions are substituted by Spot Auction only, G6 steam coal from the same source is supplied presently by Road mode to the winning bidders.

The local participants in the said auction are loading the best quality coal by handpicking via Road mode and Power plants procuring coal are being supplied from the remaining quantity which is of much lower grade, ranging from G12- G14. As the Power Sector consumers are already paying an abysmally high premium to book coal via Spot Auction, constant grade slippage of around 6-8 grades from the said mines is causing huge financial loss to the generating units.

Request has been made to ECL and CIL to take necessary measures in order to contain grade slippage from the said mines. The consumers have also suggested that G8 ROM coal may be offered to them instead of steam coal in order to mitigate loss incurred due to grade slippage.

5. Submission regarding draft amendment in the Electricity Rules, 2005 related to Captive Generating Plant:

The MoP Notification issued on 2nd November, 2022 about an amendment to the Electricity Rules, 2005 regarding captive generating plants has been lauded by CCAI and its valed member companies form the Power Sector. The proposed amendment to captive power rules will provide the necessary encouragement and incentives for industries to set up captive plants, with their subsidiaries' consumption included as their captive consumption.

Power Ministry has been informed that the proposed change will help industries benefit from captive power policy's intendedobjectives, of which they had been deprived so far. The change will provide a strong impetus to the industrial growth.

Issues faced by Non-power Sector Consumers:

6. Appeal by Industries including CPPs to further improve coal supply from CIL's Subsidiary Companies especially via rail mode:

After prolonged coal supply crunch faced by the Industries and their Captive Power Plants (CPPs) since September last year, daily average despatch of coal to this sector has improved to 2.5-3 lakh tonnes in recent times. However, the following concerns still persistin terms of coal supply to the Non-power Sector:

* While targeted allocation of coal is 25% of the total production as per recommendation of the Cabinet Committee of Economic Affairs (CCEA), CIL’s actual despatch to the Industries including CPPs is just above 14% of the total despatch at present.

*Supply of coal to the Industries has been restricted to trigger level which is 75% of the Annual Contracted Quantity (ACQ) since February ’22, forbidding NRS consumers to get the contracted quantity from indigenous sources.

* In spite of relative improvement in daily coal despatch quantity to NRS in recent weeks compared to last few months, coal despatch to NRS

from CIL has shrunk by 28.5% on a Y-o-Y basis in October ’22.

*Barring MCL and ECL, supply of coal via Rail mode from most of the CIL subsidiaries to the Industries continues to be extremely irregular. Supply of Rakes to NRS is meagre from coal companies like NCL, CCL, WCL and SECL. Average daily rake despatch by CIL to the Non-power Sector has shrunk by 38.5% in October ’22 compared to the same month last year.

* As Industrial plants and CPPs in the country are mostly designed to operate on indigenous coal, it cannot be replaced totally by imported coal as blending to the tune of 15%-20% only is admissible as per basic design of those plants. Therefore industries and CPPs are participating in Spot Auctions by paying exceptionally high premiums or resorting to open market or imported sources for coal despite having valid FSAs.

Request has been made to the Coal Minister, MoC and CIL to supply of coal to the Industries may be allowed as per ACQ instead of restricting it to trigger-level. Coal supply especially via Rail mode is needed to improve considerably from all the CIL Subsidiaries at the earliest. It is also requested that instead of keeping the CPP units idle, contracted coal quantity may be supplied to the CPP-integrated plants so that the CPPs may generate in full-capacity. This will help in transmitting surplus power to the grid for meeting the country's increased power demand

7. Request from Sponge-iron Subsector Consumers not to debar them from participating in Tranche-VI/subsequent Linkage Auction tranches:

Sponge-iron sector consumers have been debarred from participating in the upcoming linkage auction tranche for the Non-power Sector consequent to non-signing of FSA (Tranche-V) with the subsidiaries after being the successful bidders.

The consumers who have not signed the FSA with the respective subsidiaries have also compensated the seller through forfeiture of their security deposits as well as process fee by the respective coal companies. Also, Tranche-VI is being held after a gap of three years from the previous tranche. Therefore, debarring the consumers from participating in the upcoming tranche will adversely affect them.

Request has been made to MoC and CIL to condone these consumers only once considering the pandemic situation and allow them to participate in Tranche VI Linkage Auction for Sponge Iron Sector.

8. Request to extend the period by 4/5 days for seeking change in capacity/ relevant details of EUPs of prospective bidders in NRS Linkage Auction tranche-VI:

As per NRS consumers, 7-day window for revision of capacity or any other relevant details of EUPs for the prospective bidders in the TrancheVI NRS Linkage Auction is not sufficient to complete the necessary paperwork/ submission of documents and other formalities. In actuality, the consumers interested to revise the capacity or other details of the respective EUPs were getting a five-working day window.

Request has been made to CIL to extend the timeline for another 4/5 days so that the necessary formalities may be completed in time.

9. Request for allotment / supply of rakes for Coal Loading from NCL & CCL through ECR:

Due to acute shortage in coal supply via Rail mode to NRS consumers from NCL and CCL through East-central Railway (ECR), continuous process plants such as Steel. Cement, Aluminium etc. procuring coal from these two Subsidiaries are suffering as coal stock at their plant-ends have become significantly low. If the supply situation does not improve during winter, the plants will lead to coal stock-out situation.

Request has been made to the Railway Board and Subsidiary coal companies to supply at least two rakes per day to the Non-power Sector from NCL and CCL so that theseplants may sustain themselves.