Coal shortage hurts Hindalco, Vedanta

Aluminium smelter operations of Vedanta and Hindalco are at risk of turning unviable due to a coal crunch.
 
Coal supply to the captive power plants owned by the two aluminium producers is low. Coal committed in auctions is not being delivered. Since power contributes 40-45 per cent to the smelting cost of aluminium, the companies have installed captive plants of 8,700 MW to cater to their requirements. But, the aluminium industry is struggling to meet its coal requirement due to lower despatches by rail for captive power plants.
 
According to conditions listed in its fuel supply agreements, Coal India is committed to supply 75 per cent of the annual contracted quantity, below which a penalty is triggered.
 
Most of the aluminium smelters in the country face a coal shortage at their captive power plants and are working with critical stocks. The shortfall is 57 per cent at Vedanta’s captive power plant in Odisha. Bharat Aluminium Company faces a 21 per cent coal shortage and the Aditya Birla group-owned Hindalco faces a shortfall of 78 per cent.
 
The backlog of sanctioned railway rakes for the three captive power plants is 315.
 
The Aluminium Association of India has written to the prime minister’s office and the ministries of coal and railways about the situation. AAI President and Nalco Chairman TK Chand could not be contacted for comments.

“Coal India should make coal available as per contractual commitments and reinstate 100 per cent coal supply. Rake allocation should be prioritised for optimum materialisation of auctioned coal,” the AAI suggested in its letter.
The industry has invested Rs 1.2 lakh crore in order to raise the country’s aluminium production capacity from 2 million tonnes to 4.1 million tonnes. These investments are riding on debts of Rs 70,000 crore. The aluminium producers have nurtured hundreds of small and medium enterprises in the downstream sector, employing 750,000 people directly and indirectly, the AAI pointed out.
 
The country’s aluminium demand is growing at a compounded annual rate of 10 per cent. Demand is  expected to receive a fillip  from the government’s thrust on Make in India, Smart Cities and Power for All schemes, promotion of indigenous defence manufacturing, and the growth potential of the automotive and aviation industries. The aluminium industry contributed 1.2 per cent to the country’s exports in 2016-17 valued at $3.2 billion.