Business

Industry Starts Sending Out Warning Signals Over India’s Coal ‘Shortage’

Coal and railway minister Piyush Goyal has remained curiously silent, even though the current crisis has been sparked by the railways’ failure to transport adequate amounts of coal.

The complexities of India's coal supply chain are kicking off a crisis. Credit: Reuters

The complexities of India’s coal supply chain are kicking off a crisis. Credit: Reuters

New Delhi: Coal minister Piyush Goyal, who earlier promised to end India’s dependence on imported coal, has gone strangely silent at a time when Indian industry is in the middle of a fuel crisis.

Media-savvy Goyal, who is usually quite vocal and never misses an opportunity to connect with the industry and consumers, has not come out to reassure various sectors that are reeling from coal shortages.

Indeed, as multiple industry sources told The Wire, pleas for help have been met with silence. It has now fallen upon coal secretary Susheel Kumar to field the media’s questions on coal shortages.

“We don’t wish to import coal from anywhere in the world. We have sufficient coal capacity in our country,” Goyal said as early as June 12 this year. But this claim now rings hollow, with the industry being forced to step up coal imports to tide over domestic fuel shortages.

In October, total loading of imported coal by the national transporter increased by 54.74% to 8.65 million tonnes, from 5.59 million tonnes in the same month last year, as per data compiled by mjunction, an online procurement and sales entity jointly promoted SAIL and Tata Steel.

Coal imported for thermal power plants during the month stood at 1.60 million tonnes, up from 0.18 million tonnes in the corresponding period in the previous year, registering a nearly 800% increase. Railways’ revenue from coal imported for thermal plants increased 614.17% to Rs 152.76 crore from Rs 21.39 crore in the same month last year.

Significantly, power plants have been forced to ramp up coal imports at a time when prices of the dry fuel are soaring in the international market.

Goyal has spoken at several public events in recent weeks but not said anything about the prevailing coal crisis. Goyal last spoke on coal issues on September 19 at a conference in Mumbai, and that too when the issue was flagged by N. Srinivasan, president, Indo-American Chamber of Commerce (IACC), the industry body that had organised the event. At the time, he promised that smooth coal supply would be resumed by early October.

Goyal shifted from the Shram Shakti Bhawan to the Rail Bhawan following the cabinet rejig in the first week of September. But he continues to hold the coal portfolio.

Ironically, the current coal crisis has been sparked by the railways’ failure to transport adequate coal from mines to power plants.

The situation has become so critical that aluminium smelters, who depend on captive power plants, had to shoot a letter to Prime Minister Narendra Modi to seek his intervention to defuse the fuel crisis.

In the first six months of the fiscal, Vedanta Aluminium received only 0.63 million tonnes of coal, against a contracted quantity of 1.48 million tonnes — a shortfall of 57%. Fuel supply to Hindalco was short by 78% as it received only 0.2 million tonnes of supply, against the 0.89 million tonnes it had secured in the linkage auction.

Balco received 1.40 million tonnes of linkage coal against an assured supply of 1.77 million tonnes.

Under the terms of the auction and the fuel supply agreement, CIL is required to supply 75% of annual contracted quantity. Any shortfall would attract a penalty.

Vedanta Aluminium and Hindalco operate captive power plants with capacities of 3,015 MW and 3,070 MW respectively, while Balco runs a 1,140 MW plant. Aluminium is a highly energy-intensive industry in which power accounts for as much as 45% of production costs.

“The investment of Rs 1.2 lakh crore in the aluminium sector is holding a debt of Rs 70,000 crore and the employment for 7.5 lakh people is at a very critical risk in the coal shortage scenario,” said the Aluminium Association of India’s (AAI’s) letter to the prime minister.

Stressing that “coal security is the most critical aspect of sustainable operations and ramp-up of aluminium smelter”, it has sought directions to CIL to make available the committed quantity of coal.

Private power producers too have sounded alarms over deteriorating coal supplies. They have asked CIL for more rakes to alleviate the shortage of coal at their plants from its arm South Eastern Coalfields’ Korba fields.

They have pointed out that the share of rake loading for the non-power and e-auction category of consumers has come down, which is being used to ramp up supplies to state and central sector power plants instead of addressing the coal shortage at private power plants.

“Most of private power plants are facing supercritical stock levels (for less than four days) and are being forced to reduce generation,” the Association of Power Producers (APP) said in a recent letter to CIL chairman Gopal Singh.

Goyal’s plan to get the CIL to produce one billion tonnes of coal by 2019-20 is now off the table. The coal ministry has revoked the target, citing poor demand for the dry fuel.

As power minister earlier, Goyal claimed that India had a power surplus. Addressing a press conference on June 12, Goyal said, “The highest ever 60GW addition in conventional power, about 40% increase in transformation capacity, and over one-fourth increase in transmission lines since April 2014-March 2017, have made India a power surplus country, with no shortage of electricity or coal.”

But a power crisis hit India again in September this year, sending prices in the free market jumping to over Rs 10 a unit.