As part of efforts to provide relief to the power sector in the period of the lockdown, the country’s largest coal producer Coal India Ltd (CIL) has allowed power companies to use Letter of Credit for payment of coal instead of cash advance that is mandated for supplies made under the Fuel Supply Agreements (FSA).
“In order to provide relief to the power sector consumers and increase liquidity in the system, CIL has allowed the facility of Usance Letter of Credit to power sector consumers for payment of coal instead of cash advance for the Fuel Supply Agreements (FSA). This shall help significantly in improving the working capital cycle of the generators,” a statement from the coal ministry said.
Apart from power sector consumers, CIL has also introduced the same mechanism for customers of Non-Power Sectors from this month. This shall be a big boost to the liquidity in the markets and at the same time shall also provide the much anticipated relief to the consumers of coal.
CIL is supplying about eighty percent of its coal to Power Sector consumers and 550 Million Tonne (MT) coal has been offered for power sector in the current year 2020-21.