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Coal priority for thermal plants: Non-power seeks supply parity

Low domestic coal supplies to the non-power sector — as the government prioritises coal transportation to thermal plants with low stocks — has prompted the industry to appeal to Prime Minister Narendra Modi for more equitable distribution of the dry fuel.

As many as 10 industry bodies noted that low fuel supply to the non-power sectors, such as aluminium, steel, and cement, had compelled players to procure coal at significantly higher prices in the open market and purchase power from exchanges, further inflating the cost of power. The call from the industry comes at a time when 85 of the 150 thermal plants, which use domestic coal, are facing critically lower stock levels that have forced states to procure expensive power from exchanges and led to power cuts in several states, including Punjab, Haryana, Maharashtra, Uttar Pradesh and Andhra Pradesh.

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“The situation has aggravated to such a level that may compel many industries to cut down on production of force closure,” the group of 10 associations including Aluminium Association of India, Sponge Iron manufacturers of India and Coal Consumers’ Association of India said in a letter to the Prime Minister. The representation noted that the dispatches of coal from Coal India had fallen to captive power plants (by 32 per cent), steel (27 per cent), cement (14 per cent) and sponge iron (20 per cent) sectors, compared to FY20 when it should have increased under normal circumstances. The government has been prioritising coal deliveries to thermal power plants since September 2021, as power stations have been facing issues of low coal stocks due to greater power demand, amid low supply from imported coal-based power plants. The letter called for a more equitable supply of coal between the power and non-power sector consumers, noting that the supply to the non-power sector was much lower than the 25 per cent of supplies allocated to them under Central guidelines, leading to over 4,000 rakes of coal deliveries to the industry remaining pending.

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Costly power

The call from the industry comes at a time when 85 of 150 thermal plants, which use domestic coal, are facing critically lower stock levels that have forced states to procure expensive power from exchanges and led to power cuts in several states, including Punjab, Haryana, Maharashtra, Uttar Pradesh and Andhra Pradesh.

“The ongoing situation has also forced industries to procure power from the exchange, stoking an unwarranted increase in power demand and leading to an avoidable inflationary impact on economic stakeholders,” the letter noted.

Aluminium, steel and cement producers rely on captive power plants that use domestic coal to generate power for their own consumption. The average Market Clearing Price of power in the Day Ahead Market on the India Energy Exchange has been at or near Rs 12 per unit (kilowatt-hour), the highest permitted level, for the past five days. The letter added that keeping captive plants idle was creating an overall system inefficiency in the form of unnecessary coal transportation and higher specific consumption in units due to low-capacity utilisation and was contributing to raising the cost of finished goods. The rise in the price of imported coal and higher power demand, due to the economic recovery post Covid, are key causes for lower levels of coal stocks at thermal plants, according to government officials.

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