Coal India’s new GCV-based billing system for consumers likely from July

30th April 2018

After postponing the introduction of the new Gross Calorific Value (GCV)-based billing mechanism for consumers, earlier scheduled for this month, Coal India is expected have the new system in place by July.

The government-owned behemoth was to have switched to charging of consumers on this globally adopted system from April 1. Issues related to sampling and the billing procedure forced a postponement by a fiscal quarter.

GCV is the amount of heat released by complete combustion of a unit of natural gas or fossil fuel. Globally, coal companies charge consumers based on this. Instead, Coal India has been charging its consumers on the basis of grades of coal.

Company officials feel the new system would require 100 per cent sampling of coal for all consumer categories, from power producers to steel plants, cement makers and several others. Currently, 97 per cent sampling is done for the power segment but only 26 per cent of all dispatches to the non-power segment are sampled.

According to a senior company official, after a discussion with the consumers, it was agreed that in principle, non-power consumers drawing coal under any mechanism would have the option to choose either third-party sampling or associate with Coal India for joint sampling. If they do not wish to opt for either, billing will be done in accordance with the samples drawn by the company.

“This process will take some time to be implemented fully and without this, the new billing mechanism cannot be put in place,” a senior official told Business Standard. He said the sampling process had to be a robust one for the new price mechanism to be a success.

Under the current sampling system, with the given infrastructure, officials fear a delay in supplies to consumers and perhaps a spiral into a coal shortage crisis at power plants. Coal India will try out the new mechanism in two mines of each of its subsidiary entities and then opt for full-scale roll-out.

Second, the billing procedure itself needs some changes. Under the new scheme in the experimental stage, the notified price of each grade will correspond to the mid-point GCV of the respective grade band. However, the final price for all supplies will be determined on the basis of actual sampling and analysis results.

Besides, under current procedure, the earnest money deposit (EMD) under e-auction schemes gets adjusted against the price of coal as an advance. With the new billing system, appropriate financial coverage, which could be higher than the current EMD, might be required to ensure realisation of differential amounts of coal values based on analysis results.

Coal India is expected to issue a notification on this before implementing the new billing structure.

The company is expected to now rely more on information technology-enabled solutions like apps, portals, e-mail and the like for disseminating analysis and billing information to consumers without delay.

“It would have been much smoother and easier to implement the GCV-based billing system if ERP had been implemented,” the official added. Enterprise Resource Planning (ERP) is the integrated management of core business processes, often in real-time and mediated by software and technology. Coal India has already decided to implement ERP and is in the process of doing so.

Given the current constraints and the time needed to address these, senior officials feel the process cannot be implemented before July.

For coking coal, the older mechanism of charging consumers on coal grades will continue.

Source: BUSINESS STANDARD