AAI writes to PM requesting immediate resumption of coal supply for captive power plants

Owing to the sudden decision by Coal India to further restrict coal deliveries to the non-power sector via road and rake, with no prior warning, causing huge scarcity of coal rakes for industries now expanding to road-based deliveries. The Aluminium Association of India (AAI) has written to the Prime Minister’s Office, the Cabinet Secretary and the Coal Minister, requesting immediate assistance to stop the sector’s impending disruptions.

The AAI has made a very clear request in its letter that immediate steps be taken to resume supply of coal for the highly power-intensive aluminium industry captive power plants (CPP) by assigning at least 25-30 coal rakes per day, as well as enhancing coal supplies via road mode for the sector's continued survival.

The domestic coal crisis that had plagued the country for the past seven months appears to be easing in the power sector. The power sector witnessed a significant rise in the supply of coal from 3-4 days in August-September 2021 to 9-10 days. However, this has been to the loss of the non-power industry, which includes steel, aluminium, and fertiliser makers, all of which rely on coal for electricity generation.

The non-power sector's coal supplies have been reduced even further, from 3.6 LTPD to 2.75 LTPD, worsening the demand-supply imbalance and creating a large deficit for the industry. This alarming scenario occurs at a time when coal supplies to the non-power sector fell by 12 percent (from 61 MMT to 58 MMT) in FY-22, while supplies to the power sector climbed by 9 percent (from 248 MMT to 305 MMT), resulting in a massive backlog of 4,800 rakes awaiting delivery to the non-power sector.

The captive power plants (CPPs) of the highly electricity-intensive Aluminium sector are the worst hit by this circumstance. Although the industry's required coal-stock level is at least 15 days, it is already witnessing dangerously low stocks of fewer than 4 days.

To keep its smelters working the aluminium sector requires dependable and uninterrupted power sources. To put things in perspective, one tonne of aluminium takes 14,500 units of continuous electricity, which is over 145 times that of steel (1,000 units/MT) and cement (100 units/MT). In reality, the overall power demand of the aluminium sector in Odisha is 6,000 MW, which is about twice the state's average power load.

As a result, ensuring a secure coal supply would help the sector minimise its dependency on the common grid and imports from the Indian Energy Exchange (IEX). The industry has spent over 50,000 crores on CPPs near coal mining pit heads, which are designed to run on local coal grades, to generate electricity independently. According to the AAI, this inhibits the sector from satisfying its coal needs by importing coal.

Even a two-hour power outage may have huge consequences for the industry, since it can cause the molten aluminium in the smelting pots to cool, requiring crores of rupees and months of work to repair. This, in turn, might stymie the economy's ongoing post-pandemic recovery, as the aluminium sector serves a wide range of downstream and auxiliary businesses.

Continued inaction on the issue might undermine the burgeoning manufacturing sector, as well as the local aluminium industry and its related SMEs. Also, the lack of raw materials and aluminium inputs to other vital sectors might result in higher imports and lower export revenues, as well as the loss of roughly 1 million jobs, according to the report.