Decks have now been cleared for coal consumers to enter fuel supply agreements with Coal India Limited (CIL) as the coal major has decided to do away with the imported coal clause.
CIL would shortly send letters to its subsidiaries, informing them of its decision to sign FSAs with consumers without the imported coal clause, said an industry source.
It may be noted that the imported coal clause was a bone of contention between CIL and coal consumers.
According to the clause, it was mandatory for coal consumers to purchase a mix of imported and domestic coal at prices fixed by CIL. The coal consumers objected to the clause stating that buying imported coal was unviable.
The contentious issue was one of the causes for the delay in signing of the FSA between the coal PSU and consumers.
The coal consumers, who were issued Letters of Assurance (LOAs) by the CIL and had furnished the requisite bank guarantee for signing the FSA, are staring at the possibility of forfeiting the amount.
The validity of LOAs of most coal consumers was set to terminate within a month and the FSA needed to be signed before this period. As per the New Coal Distribution Policy (NCDP), the LOA issued to coal consumers was valid for one year and its validity could be extended by four months.
As a pre-condition to signing the FSA, coal consumers who have been issued LOAs were required to deposit 6 per cent of the notified base price of the annual contracted quantity of coal under FSA as bank guarantee.
The coal consumers have achieved the minimum stipulated milestones as laid down in the NCDP after being issued the LOAs by CIL and they fulfill all the eligibility criteria for signing the FSA, the source claimed.
It may be noted that by the end of March this year, 1,168 out of the 1,223 linked coal consumers had inked the FSA with CIL. These consumers mostly belong to sectors like captive power plants, sponge iron, cement, paper and aluminium to name a few.
As per the NCDP, consumers with a coal requirement of over 4,200 tonnes per annum were eligible to enter into FSA with CIL.
The FSA stipulated that the coal producer and the consumers had to agree on a trigger level of coal. Trigger level is the minimum assured level of coal supply and off take, failing which both parties would attract penalty.
