The Aluminium Association of India (AAI) on Tuesday, October 20, informed that India's aluminium makers are taking costlier electricity from the national grid, adding to pressure on utilities with limited coal stock, as state-run Coal India has curtailed supply.
Due to a severe shortfall across the nation, state-run Coal India has imposed temporary supply restrictions on non-power users, including the energy-intensive aluminium industry, forcing manufacturers to use the grid.
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Aluminium producers in India, such as Hindalco Industries Ltd and Vedanta Ltd rely heavily on power supplied by captive utilities, which are not connected to the national grid and where firms generate electricity for their own use.
The Aluminium Associates of India (AAI) estimates that the aluminium production may account for 5-6 percent of India's total power consumption fulfilled through the national grid each year.
"Since we are going to the (national) grid, that increases power demand in the country and puts further pressure on coal plants which already have low fuel," AAI informed Reuters in a statement.
According to government data, electricity usage in India's eastern Odisha state, which accounts for more than half of the country's aluminium smelting capacity, increased by 25% in the first half of October, rising more than five times faster than the national average.
As per the aluminium manufacturers, Coal India's move last week to suspend auctions and limit supplies under long-term contracts, has worsened fuel procurement problems.
"Under long-term fuel supply agreements, we were getting full supplies in June, in September that reduced to 60% and in October we are getting as low as 50%," informed AAI.
Long-term fuel supply agreements with Coal India have traditionally provided the majority of domestic supplies to the sector, with the balance coming via miner-run auctions.
“However, Coal India denying extension to five-year agreements with non-power consumers which ended this year, and some aluminium companies cancelling long-term agreements last year have increased dependence on auctions,” added AAI.
According to the AAI, some firms cancelled long-term contracts because coal was cheaper last year when coronavirus infections were high.
"We are desperate for coal. Sustaining operations will now depend on how Coal India reacts in the next ten days," added AAI.
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