CIL abolishes incentive on high grade coal to push sales
Mining behemoth Coal India Ltd has decided to abolish performance incentives it used to earn on the supply of coal beyond certain levels. The measure is expected to push coal demand and also reduce the coal cost for consumers.
"Coal India Limited (CIL) in a consumer-friendly move has removed the realisation of performance incentive for supply of higher grades of coal that is, G-1 to G-5, a provision contained in the Fuel Supply Agreement (FSA) for both power and non-power customers beyond 90 per cent of Annual Contracted Quantity (ACQ) of FSA," a top company official said.
The official, however, declined to be quoted due to the ongoing elections in West Bengal. There is no discount or change in the notified prices of coal. The incentive for power companies was 10 per cent for supply between 90 and 95 per cent of ACQ, on the supply of 95-100 per cent it was 20 per cent while for above 100 per cent it was 40 per cent. For non-power consumers, the incentive was 15 per cent for 90-95 per cent supply, while it was 30 per cent above 95 per cent. About 8 per cent of Coal India's total production is comprised of higher grade (G-I to G-5) of coal which is around 43 Million tonnes.
The abolishing of supply incentive is for both power and non-power consumers up to the grades G1 and G5. But, terms of supply incentive remains intact for grades G-6 onwards, CIL officials said.
The step may encourage consumers to lift more coal to maintain adequate demand to manage high growth trajectory in production in line with coal ministry's vision.
Coal India's high grade coal price was higher than the international coal. Coal Consumers Association had said based on February price, Indian 6100 kcal/kg coal from CIL was higher by almost 25 per cent than South African coal with comparable energy content coal.