Reeling under the crisis situation due to the continued coal shortage, a major segment of the manufacturing sector, MSMEs and Captive Power Plant (CPP)-based industry have jointly submitted a representation to the Hon’ble Prime Minister through a group of 10 industry associations.
The industry has sought the PM’s personal intervention on the urgent matter to ensure survival of the manufacturing sector, amidst the prolonged shortage in coal supplies to the non-regulated sector (NRS). While applauding the ongoing efforts to secure stable supplies for the Power sector, the association pointed out that this has been to the detriment of the nation’s industrial or non-regulated sector, which has languished in the meantime due to throttling of coal supplies to industries across the country.
The industry groups highlighted that since September 2021, several restrictions have been increasingly imposed, resulting in significant curtailment of the coal supply to industries. These included curtailment of rake supplies from all Coal India subsidiaries, longer intervals between coal auctions for industries, reduced coal quantities being offered under exclusive and spot auctions, and supply of linkage coal as per trigger level instead of scheduled quantities.
The non-power sector received a brief respite from the situation in November 2021, but this was short-lived and supplies to NRS customers via rail mode plunged once again, as preference of supplies was given to the Power sector. Curbs were also placed on road supplies to the NRS sector, adding to their woes.
Surprisingly, these restrictions have been imposed despite Coal India achieving a record-breaking production of 622.6 MT in FY 22, while its official coal offtake figures have also been commendable at 661.90 MT during the same period. The prolonged shortage has had far-reaching effects on multiple industries, including the Cement, Steel, Sponge-Iron, Aluminium, Chemicals, Rayon, Textiles, etc. and a large number of SMEs and their associated CPPs.
Listing out the plethora of issues faced by the industries owing to the prolonged coal shortage, the associations said that as per guidelines, the recommended proportion in coal allocation to sectors need to be maintained at a level of 75% for Powerand 25% for Non-Power. However, the actual supply ratio has been much lower in the past seven months. They also added that many NRS consumers have been forced to procure coal from the open market due to the prolonged shortage, often at a premium of up to four times the normal rates. In March 22, coal has commanded a premium of 300% over the floor price, indicating a severe demand-supply mismatch.
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. This is also reducing the availability of power for domestic consumption as state discoms find it difficult to source large volumes at the excessively high prices. This has especially affected smaller industries such as fertilizer manufacturers and tea producers, who are now struggling to survive. The tea industry in particular, despite being the fourth largest exporter globally, is paying double the normal rate of coal at Rs 20,000 per tonnes from the open market.
The companies are unable to rely on imported coal as an interim measure, since most of their boilers, kilns and furnaces are specially designed to run on indigenous coal supplies, leaving limited scope for imported coal as just 15-20% of the coal mix used in the production process. This renders it unviable to rely on the imports of this commodity solely, as around 85% demand must be met by domestic sources.
In their representation, the industries have cited multiple appeals made to the Government for urgent resolution of the precarious coal shortage situation. They shared that achieving an equitable level of distribution between Power and Non-Power sectors in the Jan-Mar period would have led an improvement in coal availability for all sectors ahead of the expected peak in summer. Adequate power generation by CPPs would also ease the load on Power utilities, freeing them up to supply ample power to domestic consumers.They expressed continued optimism that the Hon’ble PM’s intervention would help put an end to the crisis and allow industries to continue contributing to the nation’s progress.
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