AAI seeks PMO’s intervention as coal supply deteriorates further

With the alarming shortage in supply of coal rakes for industries now also extending to road-based supplies, an increasingly worried Aluminium Association of India (AAI) has written to the Prime Minister’s Office, Coal Minister, and Cabinet Secretary, seeking their urgent intervention to ward off the imminent disruptions to the sector.

It has been prompted by a recent adhoc decision by Coal India to further curtail road and rake supplies of coal to the non-power sector, without any advance notice.

The domestic coal crisis faced over the past 7 months has shown recent signs of abating, at least with respect to the Power Sector whose coal stocks have improved significantly to 9-10 days’ stocks from a low of 3-4 days in August-September 2021. However, this has been to the detriment of the Non-Power Sector comprising several large industries dependent on coal for power generation, including steel, aluminium, andfertilizer producers.

The coal supplies for Non-Power sector have now been further curtailed from 3.6 LTPD (lakh ton per day) to 2.75 LTPD, which will worsen the demand-supply gap and create amassive deficit for the industry.

This concerning development comes at a time when coal supplies to the non-power sector have already declined by 12% (from 61 MMT to 58 MMT) during Sept–Feb period in FY-22, while supplies to Power Sector increased by 11% (from 248MMT to 305 MMT), resulting in an enormous backlog of ~4800 rakes pending supply to the non-power sector.

The worst impacted by this situation are the Captive Power Plants (CPPs) of the highly power-intensive Aluminium industry. Although the prescribed level of coal stocks for the industry is at least 15 days, it is now seeing dangerously low stocks of less than 4 days.

The aluminium industry needs stable, uninterrupted supplies of power to keep its smelters running.To put things in perspective,one ton of aluminium production requires 14,500 units of continuous power, which is about 15 times that of steel production (~1000 units/MT) and nearly 145 times that of Cement production (~100 units/MT).In fact, the total power requirement of the Aluminium industry in Odisha alone is 6000MW, which is nearly twice the average power load of the entire state.

Ensuring stable coal supplies will therefore help reduce the industry’s reliance on drawing power from the common grid, and also on imports from the Indian Energy Exchange (IEX). In its endeavour to generate power independently, the industry has invested over 50,000 crores to establish CPPs near the coal mine pit heads, which are designed to operate on domestic coal grades. This prevents the industry from meeting its coal requirement through imported coal. 

Even a brief,two-hour power cut can have enormous ramifications for the sector, as it can lead to the molten aluminium cooling within the smelting pots, which requires crores of rupees and months of efforts to rectify. This can, in turn, significantly hamper the ongoing post-pandemic revival of the economy since the aluminium industry supplies to a plethora of downstream and ancillary industries.  

In its letter, the AAI hasput forward a very clear ask, that urgent steps be undertaken to immediately resume coal and rakes supply for the highly power intensive aluminium industry CPPs by earmarking at least 25-30 coal rakes per day, and also enhancing coal supplies through road mode for the continued sustenance of the sector.

Continued lack of urgency in the matter will lead to a possible derailment of the booming manufacturing sector and could also lead to a collapse of the domestic aluminium industry and associated SMEs. Further, the shortage of raw materials and aluminium inputs to other key industries could lead to increased imports and loss of export earnings, while risking the loss of over 1 million jobs.