Coal shortage sparks jitters in metals sector

Captive power plants are running at 50% capacity

Production in the metals sector has taken a hit as captive power plants are forced tor una ta 50 percent capacity due to coal shortage. The Indian Captive Power Producers’ Association has alleged that state-owned Coal India is not honour ing fuel supply agreements. These captive power plants have an installed capacity of about 40,000Mw, and require 190 million tonnes of coal annually. As much as 3.6 million tonnes of coal is pending with Coal India. Captive producers have said that on average, they are getting 50 percent of the coal against secured linkage sand annual contracted quantity. The captive power industry, which has a debt of $30 billion, is only able to service50-70percent of it.

Production in the metals sector has taken a hit as captive power plants are forced to run at 50 per cent capacity due to coal shortage. The Indian Captive Power Producers’ Association has alleged that state-owned Coal India is not honouring fuel supply agreements (FSAs).

These captive power plants (CPPs) have an installed capacity of about 40,000 megawatts (MW), and require 190 million tonnes of coal annually. As much as 36 lakh tonnes of coal is pending with Coal India.

Captive producers have said that on average, they are getting 50 per cent of the coal against secured linkages and annual contracted quantity. The captive power industry, which has a debt of $30 billion, is only able to service 50-70 per cent of it.

Coal supply to CPPs has been affected since April. During this period, though coal was available, the captive units were not allotted enough rakes, and independent power producers (IPPs) were given preference. Captive producers are experiencing huge financial pressure because of the Coal India subsidiaries taking advance payment and bank guarantee against the allotment of coal but not dispatching as per allotment, blocking CPPs funds for 6-9 months.

“Most of the CPP-based industries are facing severe coal shortage and struggling even to maintain critical stock level. Reduced power generation is rendering operations economically unviable with huge risk of plant closure,” said Rahul Sharma, chairman, Indian Captive Power Producers Association.

The metals sector is currently relying on imported coal and spot power market to meet its electricity demand. For the aluminum industry, energy cost comprises 40 per cent of the total cost of production. As a result of coal shortage, its production expenditure has gone up by $300 a tonne.