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Coal India recently said it has clocked a gain of Rs 3,125 crore over the past couple of years through a combination of incentives from supply of coal above annual contracted quantity and by arresting grade slippages.

The public sector miner said that an amount of Rs 1,365 crore that was provisioned to cover for coal quality variance has been withdrawn last fiscal. Moreover, the company has also received Rs 1,760 crore under performance incentive on having supplied coal beyond the annual contracted quantity.

A Coal India official said that despite having performed in terms of availability of coal in both quantity and quality, some consumers are looking at terminating fuel supply contracts citing poor quality, grade slippage and transportation costs. “We feel these are lame excuses,” the official said.

According to the miner, seeing the Covid-19 induced slowdown and lower floor prices on auction some consumers are looking to move away from contracts. Coal India might consider not signing fuel supply agreements for a period with customers who renege on committed agreements and decide to terminate contracts on frivolous grounds, the official said.

According to the miner, there is an established third party sampling system and the Central Institute of Mining and Fuel Research is an independent consultant that tests coal quality for the power sector and the Quality Council of India does it for the non-power sector.

“Coal quality variance has come down because of these efforts and prices are charged in line with the actual grades of coal supply,” the official said adding that there is a redressal mechanism in place to settle any quality issues.

Coal India, in a disclosure to the bourses, has said that offtake has been impacted by the Covid-19 lockdown. Offtake has been lower on a year-on-year basis by 2.95 million tonnes (mt)  between March 15, 2020 and March 31, 2020, 32.87mt during the April-June quarter and 3.06mt between July 1 and July 16, 2020.