In the wake of disappointing performance in the first two quarters of the year, Coal India (CIL) has finally initiated a process to recover its huge dues from power companies.
The state-owned miner has started deducting up to 25 per cent of the the upfront payments for new supplies by its consumers to recover the dues.
The Kolkata-based miner's effort has already started yielding result over the last couple of month, as the total dues has come down from a high of about Rs 13,000 crore in August to about Rs 11,000 crore now.
The company is planning to recover another Rs 6,000 crore by the end of the current financial year by this process.
“We are deducting about 15 to 25 per cent of the upfront payment made by these companies to adjust that against their earlier dues,” an official said.
“We hope that by March 2014, the total dues should come down to Rs 5,000 crore.”
Over 40 firms are to clear their dues with CIL, which currently stand at Rs 11,000 crore. Of this, state-run NTPC alone owes Rs 3,200 crore. Officials suggest dues over Rs 800 crore have been recovered from NTPC in the last two months.
Apart from NTPC, Damodar Valley Corporation and West Bengal Power Development Corporation too currently owe over Rs 1,000 crore each to CIL, which too is being recovered over the last two months.
Incidentally, the matter was taken up at the ministry level recently. The coal ministry had earlier asked the power ministry to look into the matter of clearing the power companies’ dues with CIL.
Also recently, Union Coal Minister Sriprakash Jaiswal had taken up the matter with Finance Minister P Chidambaram.
Sources suggest that CIL has started recovering the dues by deducting from the upfront payments for new supplies only after the finance ministry indicated the mechanism to the coal ministry.
The dues kept mounting over the last one year as payments were held back in many cases by NTPC and other power companies on grounds of a dispute over the quality of coal supplied. In fact, CIL and NTPC had engaged into a public spat over quality issue, which had also came into the way of fuel supply agreements (FSA) between the two.
However, the issue was resolved as both agreed to a third party sampling. Here the quality of coal on the basis of gross caloric value is determined by a third party consultant. The third party sampling is binding on both the miner and consumer, and all payments are being made on the basis of the quality determination done in the third-party sampling. NTPC chairman Arup Roy Chowdhury too had recently indicated that the matter had been resolved and it would start clearing the dues to CIL.
CIL officials are very upbeat over the recovery of dues, which is expected to positively impact the bottom line in the coming quarters. It should be noted that the company had a dismal performance in the first two quarters of the current financial year.
CIL had posted its first quarterly profit decline after four quarters in the April-June period when it had reported a 16.52 per cent drop in consolidated net profit at Rs 3731.04 crore for the quarter ended June 30, 2013.
In the second quarter too CIL had posted a second straight decline in quarterly net profit, which was marginally down at Rs 3,052 crore from Rs 3,067 crore in the corresponding period last year.