December 13, 2021 3:13:17 am
Prioritisation of coal supplies for the power sector have led to rising input costs for the aluminium, steel and cement sectors and may lead to prolonged shutdowns at some plants, according to experts.
Industry associations have written to the Coal Ministry requesting a resumption of normal supply to non-power sector consumers of coal as inventory at thermal power plants which had fallen to four days of stock in October has improved to 11 days of stock.
Since July, the Centre has directed Coal India Ltd (CIL), India’s largest supplier of coal, to prioritise supply to thermal power plants, sharply reducing the supply of the dry fuel to non-power sector players, according to industry sources.
Low coal stocks at thermal power plants forced many states including Uttar Pradesh, Rajasthan and Punjab to impose load shedding in October, as states rushed to power exchanges paying three-four times normal rates for power due to inadequate supply.
“The situation is very serious for non-power sector consumers and there doesn’t seem to be a resolution in sight,” said an expert who did not wish to be quoted.
Aluminium, steel and cement sectors utilise domestic coal to generate power at captive power plants to run operations. Such sectors are being forced to use purchase expensive imported coal as well as draw more expensive power from the grid due to low coal supplies. Aluminium plants in particular have raised concerns about coal supply as even a two-hour interruption in power supply at such plants could lead to prolonged shutdowns before they can come back online.
An industry source aware of developments said, “The requirement for non-power coal consumers is about 45-50 rakes of coal daily and the supply fell to about 27 rakes in October and improved to 33-34 rakes in November, but has fallen again due to prioritisation for the power sector.”
One rake consists of 58 train wagons and can carry up to 3,750 tonnes of coal.
Industry sources noted that while supplies to non-power sector consumers had improved in November, they had fallen again in December after a government directive that supplies be prioritised for the power sector. Union Power Minister RK Singh had indicated in October that the coal supply issues for the power sector could continue till February or March.
India’s thermal power plants currently have about 11 days of coal stock on average, compared to a recommended level of 15-30 days based on the distance of the thermal plant from the source of coal.
Coal inventories had fallen to about 4 days worth of stock in early October when a number of thermal power plants ran out of coal, cutting power supply and pushing up the average market clearing price of power in October a peak Rs 8.0 unit on the India Energy Exchange up from Rs 2.7 per unit in October 2020.
In an official response to queries from The Indian Express, the Coal Ministry said that supplies to non-power sectors had been “robust” till November, noting that CIL and Singareni Collieries Company Ltd had supplied a combined 88.4 million tonnes (MT) of coal to non-power sectors between January and November, up from 83.8 MT in the same period last year. The ministry did not, however, respond to queries on the supply of coal to non-power sectors in 2019 which was unaffected by the Covid-19 pandemic.
“The increased prices of coal in the international market has resulted in non-power consumers seeking cheaper domestic coal whose notified prices has not increased for almost 4 years now. However, with the increased coal production and despatch from coal companies, the supply to non-power is likely to increase further,” the ministry said.
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