Aluminium industry staring at 3-5 day coal inventory amid CIL's supply cut

With Coal India having significantly reduced coal supplies and rail rakes for captive power plants (CPPs), domestic aluminium industry is staring at a meager three-five days coal inventory.   

“Despite the FSA (Fuel Supply Agreement), we face this issue of coal supply cut from Coal India almost every monsoon. 2018 and 2019 was no different. What is the purpose of FSA then?” said an aluminium industry official on condition of anonymity.

The aluminium industry CPPs signs FSA with Coal India and its subsidiaries for assured long term coal supply. Any abrupt stoppage of this secured coal supply brings the industry to a grinding halt and has a severe impact on the SMEs in downstream sector resulting in increased prices of finished products and burdening end consumers.

Aluminium smelting requires uninterrupted and high-quality power supply for production which can be met only through in-house CPPs.

Alongside, Aluminium Association of India (AAI) has also made representations seeking support from Coal India asking them to resume adequate coal supply against secured linkages for sustainable industry operations, allocate railway rakes on priority for coal dispatch to the aluminium industry, allocate coal dispatches through rakes in proportion of 75 percent (power) and 25 percent (non-power), as per Ministry of Coal (MoC) circular for auction linkage, dated 15th Feb, 2016. The association has also requested that any decision for stopping or curtailing secured coal supplies should not be taken on an ad hoc basis. The CPP based industry should be give prior notice well in advance (2 to 3months) to devise mitigation plans for coal or power imports, it said.

“It is difficult to arrange for imported coal in such a short notice. Coal mines get flooded with water every monsoon and then supplies are cut for aluminium industry because it has to get diverted to power plants,” said the industry official.

Aditya Birla Group company Hindalco Industries, Anil Agarwal-led Vedanta Limited and state-owned National Aluminium Company Limited (NALCO) are the top primary producers of the metal in the country.

Aluminium is a continuous process based highly power intensive industry wherein coal accounts for 40 percent of aluminium production cost. Huge investments of Rs 1.2 lakh Crore ($20 billion) have been made to double the domestic production capacity to 4.1 mtpa to cater to the country’s increasing Aluminium demand. The Indian Aluminium industry has set up 9000 MW CPP capacity to meet its power requirement for the Smelter and refinery operations and reduce dependence on power grids.

Any power outage/or failure (2 hours or more) results in freezing of molten Aluminium in the pots which leads to shutting down of the aluminium plant for at least six months rendering heavy losses and restart expenses, and once restarted it takes almost a year to get the desired metal purity, said the association in its release.