Recent Amendment of New Coal Distribution Policy (NCDP)

The Ministry of Coal has recently amended the New Coal Distribution Policy (NCDP). The NCDP provides guidelines for the distribution and pricing of coal to for all sectors such as independent power producers, and steel plants and was circulated in October 2007. Coal is supplied under Fuel Supply Agreement (FSA).

Major amendments

Increase in annual cap of coal through State Nominated Agencies

Currently, to cater to the needs of small consumers with annual requirement of less than 4200 tonnes of coal, distribution of coal is done through agencies nominated by the state government. The recent amendment has increased this limit to 10,000 tonnes per annum. The increase in the limit was done to cater to the needs of the small units that might have expanded over a period of time.

Amended phrase of Small and Medium Sector

The Ministry has amended the phrase, ‘small and medium sector’, in NCDP 2007 to ‘small, medium and others’. Amendment has been made as under the NCDP, 2007 coal is allocated to consumers in the small and medium sector. These groups of consumers cannot purchase or enter into fuel supply agreements (FSA) with coal companies. Only those small and medium sector consumers whose annual requirement is less than 4200 tonnes per annum are eligible to take coal through State Nominated Agencies (SNA). On the other hand large units having a requirement of less than 4200 tonnes per annum were not recommended for coal by the District Industries Centre (DIC). The rationale behind the amendment is to include other sectors whose annual coal requirement is very low.

Significance

It improves the ease of doing business. An adequate quantity of coal at notified price through State Nominated Agencies would be now made available to the small, medium and other sectors.