Other industries face coal shortage as power units get supply preference

By: |
October 15, 2021 3:00 AM

To supply more fuel to power plants, Coal India subsidiary South Eastern Coalfields (SECL) has suspended supplies to non-power users since October 12.

At present, coal imports from Thailand, Australia and South Africa are up to three to four times costlier compared to domestic coal.At present, coal imports from Thailand, Australia and South Africa are up to three to four times costlier compared to domestic coal.

With the government taking several steps to address the issue of coal shortage at numerous power plants across the country, other industries – including power-intensive aluminium manufacturing units, cement plants and sponge iron makers – and several other factories run on captive power have started complaining about a fuel crisis.

To supply more fuel to power plants, Coal India subsidiary South Eastern Coalfields (SECL) has suspended supplies to non-power users since October 12. With no auctions for the industry in sight, industrial users are being pushed to source expensive power from the spot market and resort to expensive coal imports. While the government has stated that more than 0.25 million tonne (MT) is being supplied to the non-power sector on a daily basis, this is sufficient to meet only half the fuel requirement of the captive power plants.

In the meantime, the national power load management agency has reported that capacity of power generating units under outage due to low coal stocks has reduced from 11 giga-watt (GW) on October 12 to 6 GW on the subsequent day. Electricity supply shortage of 58.3 million units (MU) was recorded on October 13 across the country, improving from the deficiency of 82 MU a day ago.

Highest power supply shortages were recorded in Rajasthan (17.9 MU), Haryana (8.7 MU), Punjab (5.3 MU), Bihar (5.1 MU) and Jharkhand (4.9 MU). Coal stock at power plants is currently about 7.3 MT, equivalent to demand of 4 days, and around 142 GW of power plants, or 68% of coal-based generation capacity, in the country were running with coal stocks for seven days or less. About 2 MT of coal is being supplied to the power plants every day.

At the same time, coal stocks at the captive plants have dwindled, enough to sustain them for 1-3 days. Sources said that the captive plants are not generating at full capacity to ration the fuel, and they are sourcing more than 1 GW power from the grid and exchanges, where average spot electricity rates had shot up to around Rs 15/unit. Coal supply shortage has also pushed the industry to resort to imports, when international coal rates doubled in a year to around Rs 12,000 per tonne.

Sources said that CIL, on Wednesday, also directed its subsidiaries to cancel coal auctions to be conducted for the non-power sector, adding to the industry’s uneasiness regarding supply security. Requesting higher supply to address critical shortages of industrial units, the Federation of Indian Mineral Industries (FIMI) had recently written to Union coal secretary Anil Jain, pointing that there is a “huge risk of facing plant closure and threat of loss of huge employment and domestic value addition in the country”.

Industry sources said that “after curtailing supply through railways, even supply through roads are being stopped and we have been getting verbal assurances of supply improving in the next 2-3 days for the last 2-3 months”. In a letter addressed to the Union coal ministry and CIL, the Aluminium Association of India has sought for “immediate resumption of coal supply for aluminium industry captive power plants against secured linkages for economically viable and sustainable industry operations”.

The Centre had asked power plants – not just state-run units but even private producers – to step up coal imports, despite elevated prices in the global markets. It is unclear how quickly imports could be contracted but use of imported fuel could definitely inflate the cost of power to discoms; if the consumers will feel the pinch will depend on whether and how much of the extra cost the discoms could be allowed to pass on to different categories of consumers. Of course, industrial and commercial consumers will be first to be subjected to any tariff increase.

At present, coal imports from Thailand, Australia and South Africa are up to three to four times costlier compared to domestic coal.

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