The Aluminium Association of India (AAI) has written to Coal India Ltd (CIL), urging the Central PSU to resume coal supplies to continuous process-based power-intensive industries, such as aluminium.
The AAI missive has highlighted that a crisis-like situation has been developing for the entire aluminium sector due to the recent ad hoc decision for stopping or drastically curtaining coal supplies and rakes for captive power plants. This has resulted in a coal crunch situation for the entire aluminium sector.
“This ad hoc decision without any advance notice has brought down the industry to a standstill and industry has been left out with no time to devise any mitigation plan to continue sustainable operations. Also resorting to imports at such a short notice is not be feasible and also not in the spirit of Government’s vision to make a Self-Reliant India,” the AAI communication noted.
Captive power plants of aluminium producers have signed fuel supply agreements with Coal India Ltd and its subsidiaries for long-term coal supply. Any abrupt shortage of this secured coal supply can bring the industry to a grinding halt, AAI asseverated. This can also have an adverse impact on small and medium enterprises engaged in the downstream sector, the association cautioned.
According to an estimate made by Indian Bureau of Mines, the electrical sector accounts for around 48 per cent of India’s total aluminium consumption. This suggests that aluminium shortages could have a far-reaching impact on the electrical equipment industry, and consequently, the entire power value chain.
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How important is electricity
Aluminium production needs significant amount of electricity. Around 40 per cent of the total cost of aluminium is accounted for by electricity alone. Domestic aluminium producers have set up an aggregate 9,000 mw of power generation capacity, through captive coal-fired power plants. Reliance on the electricity grid can be hazardous, as any interruption in power supply has serious implications on the aluminium production cycle. For instance, a power outage lasting for two hours or more can lead to a complete shutdown of the aluminium smelter for at least six months.
The power requirement of an aluminium smelter with 1.5 million tpa capacity is an estimated 3,600 mw, which, for a frame of reference, exceeds the average load of most states.
Support sought
AAI has elaborated on the support sought from Coal India Ltd by the following:
- Immediate resumption of coal supply against secured linkages for sustainable industry operations.
- Rakes allocation on priority for aluminium industry for optimum coal materialization.
- Allocation of coal dispatches through rakes in proportion of 75 per cent (power generation plants) and 25 per cent (non-power), as per MoC circular for Auction Linkage, dated February 15, 2016.
- Any decision for stopping / curtailing secured coal supplies should not be taken on ad hoc basis. The CPP-based industry should be give prior notice well in advance (1 to 3 months) to devise mitigation plan, with respect to coal/ power imports.
(Featured photograph shows Vedanta Ltd’s captive power plant associated with the company’s aluminium smelter at Jharsuguda in Odisha.)
