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Aluminium industry is still grappling with coal shortage. Here’s what industry insiders have to say

Aluminium industry is still grappling with coal shortage. Here’s what industry insiders have to say

In the wake of the curtailed supply of coal to the non-power sector, the aluminium industry is forced to draw expensive power from the grid.

This curtailment of supply is posing a big challenge for Indian aluminum producers. Photo: Reuters This curtailment of supply is posing a big challenge for Indian aluminum producers. Photo: Reuters

The coal shortage for the power sector is improving gradually but the non-power sector is still reeling under stress because of the coal shortage. In the wake of the curtailed supply of coal to the non-power sector, the aluminium industry is forced to draw expensive power from the grid. Coal India Limited on Tuesday had said that the supply of coal was prioritised temporarily to power producers to replenish their dwindling stock of the coal.

"Given the low stock position at the powerhouse end due to a spurt in economic activities during a post-second wave of Covid-19, the supply of coal was prioritised.”

This curtailment of supply is posing a big challenge for Indian aluminum producers. An industry insider from India’s top aluminium producing company, on the condition of anonymity, told Business Today that initial indications of little improvement are coming on an overall basis from the supply side but the crisis for the non-power sector is continuing and supply to them is still curtailed.  

In the past, the Aluminum Association in a letter implored the government saying that the aluminium industry has not received any relief concerning the ongoing coal supply crisis. And Indian aluminium plants are grappling with critically low levels of coal stock, with no recourse or alternative means to meet their power needs and keep the plants operational. The association also said that if the coal supply is not restored immediately, it would lead to irrevocable collateral damage to these national assets.

Also read: Coal crisis: How power crunch imperils India's non-power industries

Even after raising multiple warnings, the situation on the ground for the aluminium sector has not improved. “Coal India sends 300 racks daily and around 250 racks go to the power sector and remaining 50 goes to the non-power sector. This is normal sustainable practice, and during this crisis, this supply of 300 racks came down to 220 racks for the power sector and normal supply came down to 25-30 racks for the non-power sector,” the source pointed out.

“When there was a hue and cry, then the supply to power sector improved but for non-power sector, the supply of racks went down further to 17 racks. In the last three days, there is a huge improvement in supply for the power- sector but for non -power sector the supply is still hovering around 20-22 racks,” an industry source told on the condition of anonymity,” the source added.

In a letter written for restoring the supply of coal to the non-power sector, the Aluminum Association threw light on the consequence of a power outage in the aluminium plant. “Any power outage in aluminum plant will lead to catastrophic impact and complete shutdown which will take minimum 12 months of recovery, resulting in job loss of more than 8 lakh people, banks will have debt exposure of over Rs 1 lakh crore and additional national forex loss of Rs. 90,000 crore that is roughly around 12 billion,” the letter read.

Also read: Coal shortage: Number of thermal plants with less than 4-day coal stock drop to 61

Talking about the supply of coal to the aluminium industry, the Aluminum Association told Business Today that there is no improvement in the coal supply as yet and the situation is largely the same. “The aluminium industry is managing production through a combination of stock use, coal imports, and power imports from the GRID,” the association said.

“We started consuming stocks, we started consuming stock that we keep at the end of quarter 1 for the rainy season, we went down to a level of 1-2 day stock at the end of September but since supply did not improve, so as the supply was curtailed, just to avoid the zero stock situation, we started importing partial power, we started borrowing part of our demand from the grid,” the industry source said.

According to experts, a sharp uptick in the demand for electricity from manufacturing and other sectors; low supply from the coal reserves in the wake of heavy rains in Gujarat, Punjab, Rajasthan, Delhi, and Tamil Nadu; increase in power demand in the wake of quicker than expected economic recovery; and fall in coal imports by 40 per cent are some of the factors that are fuelling this power and coal crisis in India.  

The people from the aluminium industry said that Coal India Limited should focus on better monsoon preparation for less uneven coal production. Early operationalisation of captive coal mines is the key for aluminium players to avoid such surprises in future. For this, they must be given the necessary statutory clearances to enable the operationalisation of the allotted mines.

The Aluminium Association, requesting to resolve the issue at the earliest, said, “If rationing is required, the government should do it equally for both the power sector and the aluminium sector. And not by cutting 50 per cent supplies for a sector which cannot live without power for even 2 hours. Available kitty of coal should be seen net of aluminium sector demand because of the nature of the process by which aluminium is produced. “

Vidya Ratan Sharma, managing director, Jindal Steel and Power Limited, said, “The solution is to increase the production of coal in India. GOI is trying to extract 2.00 million tonnes per day of coal. This needs to be elevated to 3.00 million tonnes per day. The private and merchant miners should be called to do the mining. We have more than 350 billion tonnes of coal reserves in India.”

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