Coal India may not sign new fuel supply agreements with customers who renege on frivolous-purpose contracts for a period of time, the state-run firm said days after major customers had abandoned fuel purchase agreements, citing poor quality and high transport costs.
It said that efforts to supply better quality and more quantity of coal than those committed have increased revenues. The company made provision of Rs 1,365 crore for variation in the quality of coal in previous years, but withdrew the provision in the last fiscal year.
“Coal India’s supplies, above agreed annual contracted quantity to its customers… also netted the company… over Rs 1,760 crore under performance incentive during the previous two fiscals,” it said.
On companies cancelling contracts for poor quality and high transport cost, a company executive said: “We feel these are lame excuses. The company takes a serious cognizance of its coal quality. Transportation costs being high is a frivolous reason to pull out as customers willingly obtain linkage (coal supply contract) for road mode with full knowledge of the distances”.
“Customers have paid premiums for securing coal through auctions in the past without complaints. Now, with Covid-19 induced slowdown when the demand for coal is low and the floor prices for coal are relatively lower, some of the customers are moving away citing reasons that are not tenable,” said Coal India.
Coal India has a third party sampling system and independent quality testing consultants. The statement mentions that the variance in the quality of coal has decreased as a result of these efforts and that prices are charged in line with the actual grades of coal supplied to consumers. Credit or debit notes are issued in the event of variation in grade, if any, and there is a remedial mechanism in place to address these issues amicably.
“During the pandemic, we stood by our customers offering them a slew of friendly measures, sops and concessions and continued supplies,” the executive said.
