Coal India To Allow Coal Supplies Beyond ACQ To NRS Customers In Long-Term Linkage Auctions

Coal India Ltd. will now allow coal supplies beyond annual contracted quantity to non-regulated sector customers in long term linkage auctions. The company has tweaked the policy provision for the same, to enable such customers to procure coal suiting their requirement, according to an exchange filing on Thursday.

The decision, taken on Nov. 13, 2024, will be applicable from Tranche VIII linkage auction onwards, which is scheduled to commence shortly. The eighth tranche auction is to starts with cement and captive power plant sub-sectors, the filing said.

“We have introduced a slew of customer friendly initiatives recently to make increased availability of coal easier to our consumers and this is one such step,” said a senior official of CIL.

Previously, in NRS linkage auctions, the end user plants were allowed to obtain linkages up to their normative requirement. The standard norm to calculate the requirement was the quantity of coal that a plant would need if it operated at 85% of its installed capacity for a whole year. The actual supply of coal through linkage auctions was up to this determined quantity. Any customer seeking above 85% of the ACQ had to step off the auction process to procure coal, the filing said.

But, several NRS consumers have requested CIL for supply of coal beyond utilisation of 85% plant capacity, to meet their full requirement. Taking cognizance of their representations, CIL has taken this step, it said.

While the eligibility quantity in the long term NRS linkages is 85% of plant capacity, the sector can now access coal over ACQ. There shall be an in-built provision of performance incentive to CIL for the quantum of actual coal supplied above 100% of the ACQ. The premium for performance incentive is set at 50% of the bid price.

So far in the seven tranches of long term linkage auctions conducted for NRS customers, since the introduction in 2016, CIL had booked 177.6 million tonne of coal.

CIL has permitted interplant transfer of coal beginning eighth tranche, in yet another customer friendly measure that bodes well for NRS customers. This means NRS customers who won the bid can transfer coal from one plant to another plant, owned by them, within the same sub-sector group. Swapping the mode of coal transport from rail to road and vice versa is also permitted now for NRS at no extra cost, as per the filing.

The frequency between conducting two linkage auctions is also narrowing down considerably. Earlier, each linkage auction would draw out for a year and half. In a turnaround, now CIL is conducting one and half linkage auctions each year.

Shares of Coal India were trading 1.78% lower to Rs 404.90 apiece, compared to a 0.77% decline at benchmark NSE Nifty 50 as of 2:30 p.m. It has risen 21.18% in the last 12 months and 7.69% on a year-to-date basis. The total traded volume so far in the day stood at 10.22 times its 30-day average. The relative strength index was at 27.71.

Eighteen of the 24 analysts tracking the company have a 'buy' rating on the stock, four recommend a 'hold' and two suggest a 'sell', according to Bloomberg data. The average of 12-month analysts' price target implies a potential upside of 32.3%.