Hoping that power plants lift more coal from its pits, state-run Coal India (CIL) has relaxed payment norms for its customers. Customers, who had to clear payments to CIL by April 7, can now pay the company by April 21.
To help cash-strapped power producers tackle liquidity crunch, CIL has also implemented new letter of credit (LC) mechanism as an additional mode of payment, the company said.
The miner has also decided not to impose the penalty that it levies on customers for not lifting contracted coal quantities within the stipulated time period. “CIL continues to supply coal, despite payment defaults, to the power generating companies in the Central and State sectors in the midst of Covid-19 crisis,” the company said.
CIL said that it was concentrating supplies to power plants with less than 10 days of stock. It is also urging power plants which run on imported coal to substitute their fuel requirement with domestic coal. Currently, power plants on an average have coal stocks of about 45 million tonne (MT) which can sustain them for 28 days. Pitheads of CIL have stocks of 75 MT.
Coal companies have to moderate production according to offtake, as coal cannot be stockpiled beyond a certain quantity without the risk of catching fire. Power plants, in the wake of a low-demand scenario, are not keen to lift more coal as of now, raising the risk of CIL output coming down.
As FE recently reported, bucking the upward trend of several years, CIL’s output declined 0.8% annually to 602.1 MT in FY20, mainly due to excessive rainfall hampering mining operations during the monsoon earlier this financial year. The drop in CIL production in FY20 would have been much lower had it not recorded a 9.9% annual rise in the final three months’ output.