Coal India Introduces Uniform Interest Rates for Delayed Payments

On September 30, 2024, Coal India Limited (CIL) announced a significant policy change that will benefit its customers by implementing uniform interest rates on delayed payments. Effective October 1, 2024, CIL will apply a standardised interest rate on all outstanding receivables, adjustments, and recoverable sums that remain unpaid after the due date.

Previously, interest rates varied widely among different Fuel Supply Agreements (FSAs), even for the same generating company. This disparity created challenges for customers and hindered the ease of business. In response to these concerns, CIL’s Board approved a revision to the interest rate definition in FSAs to establish a uniform rate.

The revised interest rate will be calculated as the Repo Rate of the Reserve Bank of India (RBI) applicable on the due date of payment, plus 3%. This new rate is significantly lower than the previous rates, which ranged from 9.5% to 14.85%, providing relief to customers. The RBI reviews Repo rates quarterly, ensuring that the interest rate remains competitive and aligned with market conditions.

The new interest rates will apply to delayed payments incurred after September 30, 2024. For payments due before that date, the interest rates will be charged as per the terms of the respective FSAs.

CIL’s decision to introduce uniform interest rates comes in response to representations from coal consumers who sought to address the disparities in the existing rates. By implementing a standardized rate, CIL aims to create a more equitable and transparent environment for its customers.

The revised interest rate policy aligns with CIL’s commitment to customer-friendly measures and ease of business. By simplifying the interest rate structure, CIL is fostering stronger relationships with its customers and promoting a more conducive business environment.

CIL’s long-term coal supplies to various customers are governed by FSAs. For the financial year 2025, CIL has an annual contracted quantity (ACQ) of 705.7 million tons (MTs) under different FSA types. This includes 226.3 MTs under pre-New Coal Distribution Policy (NCDP) FSAs, 476.3 MTs under Post-NCDP FSAs (including SHAKTI and non-regulated sectors), and 3.1 MTs under SHAKTI B(iv) and B(v).

CIL’s recent initiatives to improve its policies and practices demonstrate its dedication to serving its customers effectively and efficiently. By introducing uniform interest rates, CIL is taking a significant step towards creating a more favourable business environment for the coal industry.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.