CIL gains Rs 3,125 cr from better quality, supply beyond ACQ

New Delhi: State-owned CIL on Wednesday said supply of improved quality coal over committed grades and supply beyond annual contracted quantity have resulted in the PSU gaining over Rs 3,125 crore.

"Coal India Ltd's (CIL) concentrated efforts on supply of improved quality coal over committed grades and supply beyond annual contracted quantity (ACQ) have paid off as the company on whole gained a tidy amount over these twin attributes," the maharatna firm said in a statement.

An amount of around Rs 1,365 crore provisioned under coal quality variance in the earlier years has been withdrawn, in the last fiscal, which is the net gain to CIL on whole, it said.

The PSU's coal supplies, above agreed ACQ to its customers, having fuel supply agreement (FSA), also netted the company a substantial amount of over Rs 1,760 crore under performance incentive during the previous two fiscals combined, it said.

For 2019-20, the performance incentive earned was Rs 875 crore, whereas the same was Rs 888 crore during 2018-19.

CIL arms Eastern Coalfields and Northern Coalfields bagging Rs 408 crore and Rs 358 crore, respectively were major contributors towards the performance incentive for 2019-20.

Both the arms together accounted for around 88 per cent of the company's total incentive gain.

"Similarly, for 2018-19 these two companies stood out for 83 per cent of CIL's overall performance incentive," CIL said.

About the customers terminating supply contracts (FSAs) citing poor quality, grade slippage and transportation costs, a company official said, "We feel these are lame excuses. The company takes a serious cognizance of its coal quality," and added that the transportation costs being high is a frivolous reason to pull out as the customers willingly obtain linkage for road mode with full knowledge of the distances.

The customers have paid premium for securing coal through auctions in the past without complaints. Now, with COVID-19 induced slowdown when the demand for coal is low and the floor prices for coal are relatively lower some of the customers are moving away citing reasons that are not sound.

Coal India might consider stopping further FSAs for a period with such customers, who renege on committed agreements and decide to terminate their contracts on frivolous grounds, it said.

For enhanced transparency on coal quality front, CIL has a well-established third party sampling system covering all its customers and it had appointed well reputed agencies like 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 to these efforts 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.

There is no uncertainty of supplies as the purpose of linkage auction was to ascertain continuous and committed supply of coal during the agreement period in a transparent manner.

During the pandemic we stood by our customers offering them a slew of friendly measures, sops and concessions and continued supplies,"

the official said. CIL accounts for over 80 per cent of domestic coal output.