Aluminium makers' captive power plants stare at domestic coal shortage

Domestic coal shortage will impact aluminium and other industries as increase in raw material cost and subsequent import of the dry fuel may not only escalate costs but could also cripple the industry.

As per industry estimates, 11.73 million tonne coal is used for one million tonne of aluminium production and, therefore, the cost escalation might be to the tune of $225 per million tonne.

Due to the stoppage of coal supply, prices in the spot market have risen.

Indian Captive Power Producers Association (ICPPA) has written to Union Coal Secretary Inder Jit Singh seeking resumption of coal supply for process based industries such as Aluminium, Chemicals, Metals etc.

It is in continuity to the crisis that has been built-up in last one year or so due to decisions to frequently stop or drastically reduce coal rake supplies by to the captive power producers. 

"Even though CPP (captive power producers) are power producers, coal rakes are being denied to them for making supplies to larger power plants and PSUs," Rajiv Agrawal, Secretary General, Indian Captive Power Producers Association (ICPPA) said.

In the last four years, the share of industrial power consumption has come down from around 45 per cent to 40 per cent of gross national power consumption, suggesting the real decline in industrial activities, ICPPA said.

Power is a major cost component and coal availability is critical for the captive power based industries.

Out of the total 40,000 MW captive capacity, 28,000 MW or 70 per cent captive plants are coal based and the power cost forms 30-40 per cent of the manufacturing industry.

Captive power-based continuous process industries like Aluminium smelting requires uninterrupted quality power supply for production, which can be met only through in-house plants. 

Any power outage for two hours or more results in shutting down of a plant for at least six months, which renders heavy losses and also restart expenses.

The rake loading for non-power sector and captive units has been substantially low for FY'18, with only 12.1 per cent of total rakes allocated for captive plants.

The industry body has sought immediate resumption of coal supply for the captive-based industry to sustain operations and has also requested the government to avoid ad-hoc decisions on coal supply curtailment and bring in a system that gives an advance notice to the industry for making alternate arrangements.