In Short:
The Indian government has implemented a new penalty for Coal India (CIL) if it fails to supply coal to industries via e-auctions. This move aims to improve the fairness of contracts and boost supplies to non-regulated sector (NRS) industries like steel and cement. Additionally, CIL has introduced online signing for fuel supply agreements, enhancing business convenience. Coal production is increasing, with a focus on meeting NRS demands.
Coal India Faces New Penalties to Enhance Supply Compliance
In an unprecedented move, the government has directed **Coal India Limited (CIL)**, which is responsible for a staggering **80%** of India’s coal production and dispatch, to implement a penalty system for any shortfall in coal supply procured via e-auctions by consuming industries. This decision is a landmark shift aimed at ensuring accountability and reliability within the coal supply chain.
- Also read: Coal India clears decks, allows supplies beyond limit to thermal power plants
Streamlining Processes for Non-Regulated Sector
To further enhance the ease of doing business—especially for the **Non-Regulated Sector (NRS)**—CIL has introduced the option of online signing for fuel supply agreements (FSAs), which will now also include the **SHAKTI B auctions**.
These adjustments were part of a recent announcement from the coal giant, stating that power plants, including **Independent Power Producers (IPPs)**, would receive coal supplies exceeding their annual contracted quantity (ACQ).
Production and Supply Insights
In **FY24**, a total of **972.60 million tonnes (mt)** of coal were produced, with **809.64 mt** dispatched to the power sector, reflecting an **8.78% year-on-year increase**. Supplies to the NRS stood at **162.96 mt**, marking a significant **22.32% rise** from the previous year. The coal distribution showed that the power sector consumed **83.24%**, leaving **16.76%** for NRS industries.
Prioritizing Consumer Needs
A senior government official emphasized that “**Consumer is king**, and we want to make this clear to everyone in the coal sector.” In a shift from previous practices where CIL forfeited security deposits (now reduced from ₹500 to ₹150), penalties for non-compliance are being implemented to ensure fairness in contracts. Previously, CIL faced no penalties for failing to fulfill coal supply commitments, leading to grievances from NRS industries.
A Bright Future for Coal Production
Another government source pointed out the optimistic projection that **India’s coal production** is expected to surge to **1,080 mt by March 2025**. The Ministry aims to ensure that this increased production is matched with consumption to avoid losses and inefficiencies associated with surplus coal lying unused at mining sites.
Revolutionizing Signing Processes
The initiative of online signing for FSAs is seen as a transformative step. Previously, consumers had to visit coal companies in person to complete these agreements. Now, CIL has initiated online signing for NRS consumers stemming from the **VII Tranche of e-auctions**, which will also extend to the **SHAKTI B (VIII) (a) auctions** held several times a year.
Shifting Attention to NRS Industries
The Ministry is now making a concerted effort to meet the needs of NRS customers, including sectors like captive power plants, steel, cement, and sponge iron. These industries are essential to the backbone of India’s growing infrastructure and manufacturing landscape.
Traditionally, coal was allocated primarily to the power sector before addressing NRS demands. However, this year has seen an abundance of coal, resulting in no supply restrictions for power, translating to around **20%** higher supply to NRS enterprises year-on-year.
Looking ahead, the Ministry intends to introduce long-term coal linkages for NRS consumers without any end-use restrictions. This measure not only promises to bolster fuel supply but also aids companies in planning their resource allocation more effectively.
Sources indicate that the Ministry is currently exploring this proposal and engaging in stakeholder consultations. An amendment of the **NRS linkage auction policy of 2016** is on the horizon, a change that has been long-awaited by NRS consumers eager for streamlined access to coal supplies.
