Centre announces new coal distribution policy

November 14th, 2007 - 2:32 am ICT by admin  
The new policy takes into consideration the regulatory regimes in which various sectors of the economy are functioning for classification of consumers and prioritization of coal supplies in terms of quantities.

The policy also envisages an enlarged role for state governments in the supply of coal to a large number of small and medium industries.

Under it, e-auction sale of coal will be re-introduced with certain modified features to encourage emergence of proper coal market in the country.

A government release said that it has been evolved based on the extensive discussions held by all stakeholders.

The Committee comprised of representatives from the Ministries of Power, Steel, Law, Finance, Small Scale Industries, Department of Industrial Policy and Promotion, Planning Commission, Coal India Limited and Coal Mine Planning and Design Institute Limited.

The key features of the new Coal Distribution Policy are as under :

I.Classification of consumers and supply of coal thereof :

-The existing classification of coal consumers into core and non-core sectors is being dispensed with.

-Presently, the core sector consists of power, steel, cement, fertilizer, paper, aluminum, defence, loco, central PSUs and exports.

-Non-core sector comprises of remaining consumers in various types of industries like textiles, rubber, engineering, glass, refractory, lime, jute, copper, foundries, crockery etc. besides seasonal consumers like brick sector.

-Since power and fertilizer sectors are operating in a price regulatory regime coal to the extent of 100 percent of the normative requirement of the units in these two sectors will be made by the coal companies as at present but only under Fuel Supply Agreements (FSAs).

-In view of the importance of the defence sector and railways, their total requirement will continue to be met.

-For all other consumers with coal requirement of more than 4200 tons per annum 75 percent of their normative requirement of coal would be provided under FSAs.

-Supply of coking coal to steel plants would be based on FSAs as is done at present.

-In respect of small and medium sector consumers the existing cap of 500 tons of coal per year will be increased to 4200 tons per year.

-Since Coal India Limited and its subsidiaries cannot deal with a large number of such small and medium sector consumers, state governments will be required to take up the responsibility of identifying such consumers and arranging supply of coal to them through their designated agencies.

-To begin with, a quantity of 8 million tons of coal per year will be made available to meet the requirements of the small and medium sector consumers.

-State Governments will enter into Fuel Supply Agreements with public sector coal companies for sourcing coal for distribution through their designated agencies which could include National Cooperative Consumers Federation, National Small Industries Corporation, any state government agency and established industrial bodies.

II.Letter of Assurance and Fuel Supply Agreements :

-An innovative feature of the new policy is the concept of Letter of Assurance (LOA) to be granted by the coal companies to the project developers as against the present system of granting coal linkages.

-Such LOAs will be converted into FSAs after specific milestones are achieved by the project promoters in a period of two years in case of power plants and one year in case of other consumers.

-Consumers granted Letter of Assurance have to furnish a Bank Guarantee equivalent to five percent of their annual requirement of coal which will be forfeited if the suggested milestones are not achieved within the stipulated period.

-Bank guarantee system is being introduced to encourage only genuine consumers and to prevent pre-emption of coal linkages without developing the end-use projects in time as has been happening currently.

-Letters of assurance in case of power (including power utilities, IPPs and captive power plants), steel (including sponge and pig iron) and cement sectors will be granted by the Standing Linkage Committee (Long Term) functioning in the Ministry of Coal.

-For all other consumers, LOA will be issued by the Coal India Limited.

-Under the new policy, Coal India Limited will be at liberty to import coal to meet their supply commitments to various consumers and in such case necessary price adjustments will be made by the coal companies.

III.Introduction of e-auction sale of coal :

E-auction sale of coal will be re-introduced with certain modifications like :

i)There will be no floor price for bidding under e-auction scheme as was the case in the last phase of e-auction sale of coal.

ii)Coal PSUs will, however, have the liberty of having a reserve price which is not lesser than the notified prices of coal for appropriate commercial decision making.

iii)Under the new mode of e-auction there will be two platforms - one for the supply of coal for a longer period of one year or more and the other for supply of coal for shorter periods as per the frequency of offer of e-auction.

iv)All the coal PSUs will be required to announce a schedule of offer of coal for sale under e-auction mode at the start of the year for proper planning both by the coal supplies and consumers.

IV.Efficiency norms :

To encourage economic and efficient use of coal by the consumers, norms of consumption for all the major sectors like power, steel, cement etc. will be reviewed taking into account continuous improvements in technology, manufacturing process and other developments.

V.Pricing of coal supplies :

Coal to be supplied under FSAs will be charged at the notified prices of CIL. For supplies to small and medium consumers, state government designated agencies would be entitled to charge actual freight and 5% as service charge over and above the basic price charged by the coal company.

VI.Implementation of new policy :

Various provisions of the new Coal Distribution Policy will be operationalized as per the following time schedules :

a)All the existing linked consumers shall enter into FSAs with respective coal companies within a period of 6 months failing which coal supplies can be discontinued.

b)State Governments shall put in place necessary institutional mechanisms for supply of coal to small and medium sector consumers as envisaged in the new policy within a period of six months.

c)Provisions of the new policy applicable to the new consumers will be given immediate effect to.

d)E-auction sale of coal to be introduced within one month and until such time the present scheme of sale of coal under e-booking will continue to operate. (ANI)

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