Coal crisis staring at non-regulated sector due to priority supply to power sector

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With no respite in sight to the continued shortage of coal faced by the Non-Regulated Sector, the Federation of Indian Mineral Industries (FIMI) has written to the Prime Minister’s Office requesting for resumption of normal coal supplies by Coal India Limited and availability of railway rakes by Railway Board.

In its letter dated December 9, 2021, FIMI has pointed out that despite the efforts of Ministry of Coal and Coal India Limited, a coal crisis in the country still prevails and continues to affect the business continuity and profitability of industries belonging to the Non-Regulated Sector (NRS), viz Aluminium, Steel, Cement, and other metal industries, that are heavily dependent on domestic coal.

The second quarter of current financial year saw the coal crises unfold due to increased power demand, high import coal prices and lower domestic coal production. At this time, most of the coal meant for NRS was diverted to Power Sector to keep them running with sufficient stocks. This decision by Coal India led the NRS consumers to resort to coal imports and power imports from GRIDs to regulate their production. With the crisis hitting its peak during September-October 2021, the Government witnessed full support of the NRS consumers for diverting maximum quantity of coal to Power Sector. Since then, the situation for the Power Sector has improved to current levels of 10 days stock availability, while on the other hand, the NRS consumers are struggling to get un-interrupted coal supplies and rakes for continued operations, ultimately leading to a coal crunch.

In its recent letter to Indian Railways dated December 2, 2021, Coal India had advised it to enhance the rake supplies exclusively for Power sector to 296 rakes per day, compared to a combined 272 rakes per day for both Power and Non-Power sector in the month of November 2021. Such a step, if taken, will put the consumers of Non-Regulated Sector (NRS) in a precarious situation depriving them from getting sufficient coal rakes even for its sustained operations (for which the normal demand is 50 rakes per day).

The demand for sufficient coal rake allocation is directly linked to sustaining the Indian economy, as the NRS and other metal industries have played a critical role in bringing the industrial activity back on track and in achieving V-shaped economic recovery. With revival of economy and post pandemic industrial activity, the non-power sector is highly dependent on un-interrupted coal supplies which is vital for sustainable operations and cost-competitiveness of power intensive industries vis-à-vis global players. Any production curtailment by this sector could have a cascading effect on consumption and downstream supply chain, thereby adversely impacting the nation’s GDP growth.

It could also create inflationary pressure in the domestic market besides making the products non-competitive in the global markets.

Keeping the above concerns in mind, FIMI has earnestly requested the PMO’s urgent intervention and support in advising Coal India and Railway Board to normalize the coal rakes supplies by earmarking at least 50 rakes per day for the Non-Regulated Sector.

20211213-172754

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