CIL Seeks Amendment To Coal Distribution Policy.

Unable to meet many of its supply commitments, state-owned Coal India Ltd (CIL) has sought an amendment to the New Coal Distribution Policy (NCDP) of 2007.

CIL’s demands include a roll back on the 10 per cent volume limit on coal e-auction, abolition of tapering linkages and limiting supplies through Fuel Supply Agreements (FSAs) only to consumers by Coal Governance and Regulatory Authority (CGRA), among others.

The demands were put forth by the chairman of the state-owned company during an inter-ministerial meeting chaired by Coal Minister Sripraksh Jaiswal last week to discuss the possibility of reviewing NCDP. The meeting was also attended by representatives of steel, power, rail and shipping ministries, planning commission, power generator NTPC Ltd and industry chambers.

“These are massive and fundamental changes. No doubt CIL is asking for a complete overhaul of the current coal distribution policy," said a senior analyst from an accounting and consultancy firm. “It clearly indicates that the company is looking at some way of prioritising allocations."

During the meeting, CIL Chairman N C Jha said only the consumers governed by CGRA should get coal at the notified price through FSAs. Interestingly, the coal sector does not have a regulator. While Jha was not available for comment, a senior official who attended the meeting explained that CIL wants to sign supply commitments only with consumers in the regulated sectors of power and fertilizer.

Jha demanded that coal distribution for non-CGRA consumers should be made through state government agencies. And if states do not take this responsibility, supplies should be made through e-auction, he said. To accommodate this, he asked for lifting of the 10 per cent limit on offering coal through e-auction. This, according to another analyst, could help the company liquidate its stocks through e-auction and fetch better realisation.

The CIL chairman also asked for abolition of tapering linkages, a mechanism whereby the government assures coal supplies to a company with a captive mine until its own production of coal picks up. “The company’s argument is that getting coal for core consumers should be the first priority," the official explained.

To ensure that linkages committed by the government are in proportion to supply, Jha also asked for restricting the linkage committee to distribute only available coal. The company has also asked the government to absolve CIL of the responsibility of filling the domestic demand-supply gap through imports.

The NCDP makes it mandatory for CIL to meet its supply commitments even if it has to resort to imports. The company, however, argued that back-to-back tie-ups with consumers are necessary to initiate import of coal through long term-offtake contracts. The planning commission has opposed the proposal and is insisting on retaining the current provisions making imports as part of CIL’s responsibility.

CIL’s production last fiscal remained flat at 431 MT. Its share price at the Bombay Stock Exchange today closed at Rs 391.5, down 0.8 per cent as compared to the previous close.

Source : smartinvestor.in