Coal India revises policy to let all consumers select mine of choice

Consumers will now be able to choose a Coal India mine from which they buy coal.

In a move to tap more consumers and provide them with better experience, Coal India has modified its policy to allow supply of any quantity from any mine as sought by consumers, instead of the producer allotting it.

Applicable for consumers from the power and non-power segments, such as cement, steel and others, consumers can now select any mine to obtain a contracted quantity of coal, irrespective of the location. The quality of coal — ash and sulphur content — as well as the variant varies according to the place or mine of origin. Consumers often demand for a particular variant of coal.

For example, the power sector mostly demands low-sulphur and low-ash non-coking coal, while the cement sector prefers coal with a higher sulphur content and the steel industry demands the coking variant. In 2011, Coal India had framed the ‘Mine-Specific Coal Supply Policy’, which allowed its customers to benefit from assured supply of coal from a preferred source and gain from reduction in logistic costs. However, this policy was so long

applicable to consumers having a minimum requirement of 1 million tonne (mt) of coal per annum. Further, the mine from which the coal was sourced should have had an annual production capacity of 2.5 mt.

The Coal India board has modified this policy to accommodate more consumers.

“The minimum per annum requirement of the consumer has been downsized to 0.25 mt from 1 mt. Also, the number of mines that can take part in the policy has been increased. Now,

consumers can ask for coal allotment from a preferred mine that has an annual production capacity of 1 mt,” a senior Coal India official said.

“This change would help consumers needing smaller amounts of coal and it has been done considering the market dynamics and the profile of consumers and mines, which vary from subsidiary to subsidiary,” a company official said.

Coal India executives said while this policy will help augmenting offtake as consumers would prefer to have a select source of coal, which ensures a steady coal grade and quality, this revision in flexibility will also help expand sales and acquire new customers who don’t have substantial requirement of coal.

Prior to this revision, power companies— the largest clients of Coal India — were the major beneficiaries, although this policy was also applicable for nonpower consumers.

Following this revision, supply contracts with customers can be made for existing as well as new mines. Moreover, the policy has also allowed relaxation of the minimum threshold limit for consumers and the Coal India subsidiaries — who own and operate the mines— to take a call on the matter.

“The customer’s profile varies according to region. In some places, particularly central India, besides the large power generators, mid-sized cement is a key consumer, while in areas in the east, steel consumers have heavy demand for coking coal. Smaller sectors, such as brick kilns, also have demand for coal,” another Coal India executive said.

While Coal India has accommodated this relaxation of mine allocation for consumers having fuel supply agreement (FSA), it is not applicable for eauctions.