New Delhi: As part of efforts to relieve the electricity sector during the lockdown period, the largest coal producer Coal India Ltd (CIL) allowed power companies to use a letter of credit for payment for coal instead of the cash advance which is mandatory for supplies made under the Fuel Supply contracts (FSA).

“In order to relieve the electricity sector consumers and to increase the liquidity of the system, CIL authorized the Usance letter of credit facility to consumers in the electricity sector for payment for coal instead of a cash advance for fuel supply agreements (FSA). This will significantly help improve the generator working capital cycle, ”a statement from the Coal Ministry said.

In addition to consumers in the power sector, CIL also introduced the same mechanism for customers in the non-power sectors starting this month. It will be a big boost to liquidity in the markets and at the same time will also provide the long-awaited relief to consumers of coal.

CIL supplies around eighty percent of its coal to consumers in the power sector and 550 million tonnes (MT) of coal were offered for the power sector in the year 2020-21.

Follow us and connect on , Facebook, Linkedin