State run monopoly Coal IndiaNSE 2.51 % Ltd said it has allowed consumers to lift coal under a new mechanism that gives them time to pay for the fuel, partly relieving them from making advance payments. “CIL has already allowed the facility of Usance Letter of Credit to power sector consumers for payment of coal instead of cash advance for the Fuel Supply Agreements (FSA). This shall help significantly in improving the working capital cycle of the generators,” a coal ministry statement said.
Usance letter of credit is a payment security mechanism for CIL where there are two banks. Issuing bank is the one that issues letter of credit to the coal consumers depending on their credit profiles and a Receiving bank that based on the letter of credit releases payment to CIL once certain conditions are met. While CIL gets payment on presentation of invoices from the receiving bank, the coal companies can make payments after sometime.
