The non-power sector industries have been stocking up on imported coal in the past few months not just to meet their blending requirements, but also in preparation of the rainy season even as domestic supplies of the key commodity declined further.

The industries have been complaining about the constantly declining coal despatches post November 2021, which fell further by around 28 per cent y-o-y in April-May 2022. Against a daily average requirement of 5 lakh tonnes per day, the industries are receiving about half of that quantity.

Besides, many industry players, particularly in aluminium, imported who have imported coal have not received the requisite domestic supply for blending. Industry players say that Coal Ministry is diverting more supplies to power sector on priority basis, which has skewed the balance. Record high premiums in spot e-auctions is another cause of concern.

Imports higher than domestic supply

Sources analysing the daily coal rake movement at railway sidings other than that of power related facilities say that from April till June 16, the daily average rakes supplying imported coal was almost double that for domestic sources. A single rake has around 58 wagons and carries about 3,800-3,900 tonnes of coal.

During April 2022, the Railways supplied 61.4 rakes per day for imported coal and 34.7 rakes for domestic. Similarly in May, imported coal was supplied through 61.2 rakes per day against 32.2 rakes daily for coal from domestic sources. Till June 16, Railways supplied imported coal through 58.2 rakes a day, whereas 28.1 rakes daily were allocated for domestic sources.

However, Power House Sidings (PHS) during April received domestic coal through 390.7 rakes daily and imported coal through 14.5 rakes. In May, it was 421.6 rakes daily for ferrying domestic coal and 22.4 rakes for imported coal. Similarly till June 16, PHS received domestic coal through 423.1 rakes on an average daily and 27.2 rakes per day were allocated for imported coal.

Depleting supplies

A spokesperson for Aluminium Association of India ) said coal despatch to NPS fell around 28 per cent Y-o-Y from 23.1 million tonnes in April-May 2021 to 16.1 mt in April-May 2022. Coal despatch to Captive Power Plants (CPPs) fell 49.6 per cent Y-o-Y from 3.4 mt in April 2021 to 1.72 mt in April 2022.

“The ongoing coal crisis therefore needs to be managed more prudently. Rather than attempting to supply rakes to only the power sector, especially long distance coastal-based plants, supplies must be streamlined to feed the short distance, highly efficient CPPs of power intensive industries set up near mine pitheads,” the spokesperson added.

Given the large requirement of power and coal, all aluminium smelters and their captive power plants are constructed near pitheads and hence their boilers are designed to run only on Indian coal. Due to this, they cannot function on imported coal beyond a certain blending percentage (15-20 per cent).

“Aluminium CPPs are already importing this volume of coal. To keep the CPPs running to avoid catastrophic events of power failure, the industry requires 85 per cent of coal from domestic sources of Coal India. Even when industries import coal, the priority is being given to rakes of Power Sector from port to the plant,” he added.

Auctions

Analysts point out that with international coal prices continuing to be elevated, expect significant demand from the industries taking e-auction premiums to much higher levels in Q1 FY23. Premium was 345 per cent in April and 398 per cent in May 2022.

An aluminium industry spokesperson said, “Consequently, our members are now sourcing a large chunk of power from the exchange, which also includes power produced by IPPs situated far away from coal mines and hence have a high turnaround time for coal rakes.”

Last month, the Coal Consumers Association of India (CCAI) urged Coal Minister Pralhad Joshi to cap spot auction prices as the spot e-auction by Mahanadi Coalfields (in May 2022) rose over 800 per cent more than the notified price.

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