Coal shortage cripples non-power sector as supplies to power sector prioritised

New Delhi, Dec 8: Federation of Indian Chambers of Commerce and Industry (FICCI) state council, in its recent letter to the Ministry of Coal, has addressed the issue of the proposed increase in coal rakes for power sector that in turn will deprive the consumers of Non-Regulated Sector (NRS) from getting sufficient coal rakes, ultimately leading to a coal crunch.

The council has highlighted a recent decision of Coal India to enhance the rake supplies for power sector to 296 rakes per day. The decision dated December 2, 2021 has been taken in order to increase coal stocks level in power plants to 14 days from current level of around 10 days.

Coal Ministry’s move to increase coal rakes for the Power Sector will deprive Captive Power Plants (CPPs) from coal rakes and will lead to coal crunch for the industrial manufacturers.

The months from August to November witnessed the provision of ‘Priority Coal Supplies’ to the power sector which led to a difficult situation to the Non-Regulated sectors (NRS), adversely impacting their operations. The letter further says that in the month of November, 255 out of 272 rakes allocated were supplied to the power sector, while the non-power sector was provided just 17 rakes against their requirement of around 50 rakes per day. The proposed plan for Dec 2021 also envisages just 26 rakes per day for NRS.

The main transportation channel for coal from point of production to consumption is through railway rakes. In the last few months, the supplies meant for Captive Power Producers (CPPs) and industries have been either stopped or significantly curtailed for diversion of these to the power sector, which has led to a perilous situation for other coal-based Power Generators, adversely impacting their industrial operations. Diversion of rakes away from CPPs to the Power Producers (PP) by giving them a higher priority is a discriminatory step.

This will lead to coal shortage for industrial production activities, which will not augur well for the manufacturing supply chain. If the situation persists, it is bound to create a precarious condition for NRS sector which represents some highly power intensive sectors, leading to an adverse impact on their sustainable industrial operations and by extension, on the economy.

As a result of the shortage, the NRS consumers will be forced to procure Grid power generated by Power Sector through coal diverted from NRS, leading to skyrocketing power prices and power deficit for other consumers.

With the coordinated efforts of Ministry of Coal and Coal India, the situation for the Power Sector has improved to current levels of 9 days. On the other hand, the NRS consumers are struggling to get un-interrupted coal supplies and rakes for continued operations.

Their coal supplies are at 40-50 per cent levels, which will directly impact the overall Index of Industrial Production (IIP) and hence create bottleneck for nation’s GDP growth. The demand of Power Sector is directly linked to the growth of Indian industry, where in the NRS industry has played a critical role in bringing the industrial activity back on track. It has provided the necessary thrust for nation’s GDP witnessing a healthy growth of 8.4 per cent in Q2-FY22, and further forecast to double digit growth in Q3-FY22. The NRS including the DRI and CPP based industries are highly dependent on un-interrupted coal supplies, which is vital for sustainable operations and cost-competitiveness of power intensive industries, and therefore, makes it critical to maintain continuous coal supplies.

Keeping the above in mind, FICCI state council has requested the ministry’s intervention and support for normalizing coal rakes supplies to DRI, Captive Power Plants of Steel and other Industries. They have requested to earmark at least 50 rakes per day for Non-Regulated Sectors to enable optimum materialization and balanced economic development of the nation.