Coal diversion to power firms leaving non-power ones fuel-starved: ICPPA

Despite the power sector having come out of the coal crisis, captive power plant (CPP)-based non-power industries, such as aluminium, steel, zinc and cement, among others, continue to get less than 50 per cent of their coal requirements. 

This comes despite these industries having secured linkages and Coal India (CIL) auctions, Indian Captive Power Producers Association (ICPPA) said on Monday.

The apex body of captive power producers has made a representation in this regard to the coal, railways and power ministries. It has sought urgent support for normalising coal supplies to CPP-based non-power industries. 

Apart from coal shortage, availability of coal rakes is also another hurdle being faced by the industries. Rake supplies to these industries are at 40-50 per cent of their requirements, said ICPPA.

The coal shortage issue for non-power industries has been going on since July-end. On the other hand, with the coordinated efforts of all ministries, the situation for the state power sector has improved to 10 days of coal inventory. It was 2-3 days in September-October.

CPP industry consumers are still getting overall coal supplies at just 40-50 per cent levels for the fifth month since the crisis. This is leaving them struggling to get uninterrupted coal supplies for continued operations, said the ICPPA.

“Many large CPP consumers are situated close to CIL mines and cannot import coal due to logistical constraints,” it said.

November-March is the peak season of production for Coal India. The ongoing months are the right time for the ministries to intervene and address the issue, said ICPPA.

The current coal shortage scenario, however, has been a recurring situation every 3-4 years. So far, there have been major supply issues for non-power industries in 2014, 2017, 2021 and a few years earlier, it said.

INDUSTRY SEEKS GOVT SUPPORT

• The apex body of captive power producers seeks urgent support for normalising coal supplies to non-power industries
• Availability of coal rakes is also another hurdle being faced by the industries
• Captive power plant consumers still getting overall coal supplies at just 40-50% levels for the fifth month since the crisis 
• Association says any power outage in aluminium plants will take a minimum 12 months for recovery and lead to job losses for over 800,000

“The phenomena is the result of (and triggered by) managerial actions of a few people. This leads to curtailing or infringing the ‘fundamental rights’ of others for freely doing business and earning a livelihood,” said ICPPA.

The energy-intensive aluminium industry’s operations are one of the most severely impacted, with price being on the rise recently due to the global shortage. With the coal crisis impacting the industry, the scarcity will lead to further increase in rates.

“The problem with independent power plants is that they do not prefer stocking coal since it is a big working capital block for them. They know that in case of a crisis, the government will drop non-power industries and supply them. So, there is no incentive for them to get better,” Satish Pai, managing director (MD) of Hindalco Indu­stries, told Business Standard.

Any power outage in aluminium plants will lead to catastrophic impact and complete shutdown. It will take a minimum 12 months for recovery, resulting in job losses for more than 8 lakh people, ICPPA said in its representation.

Banks will have debt exposure of over Rs 1 trillion and additional national forex loss of Rs 90,000 crore. ($12 billion), it said. The industry has set up inhouse CPPs of 9,400 Mw with an investment of Rs 50,000 crore. It can only meet its power requirements through CPPs for which it requires 1.5 lakh tonnes of domestic coal daily (55 million tonnes every year).

It is critical to maintain continuous coal supplies to the aluminium sector for production of captive power. Otherwise, any shortfall will jeopardise investments to the tune of Rs 1.4 trillion, including a debt of Rs 1 trillion. 

This would also cause shortage of raw material to key industries, leading to increase in aluminium imports and loss of export earnings. This will have a negative impact of $10 billion (Rs 70,000 crore) per annum.

The Indian Captive Power Producers Association has requested the ministry’s immediate intervention for normalizing 100 percent coal rakes supplies to CPP industries and help them partner in the economic development of the nation.