Coal shortage hurting non-power sectors still year after supply shift




Since the demand-supply mismatch started in August last year, the major casualty has been the non-power sectors of steel, aluminium, iron, paper, cement, etc. as the Centre prioritised power units for supply. Almost a year has passed since then and production has increased, but the situation has hardly improved for these sectors, sector executives told Business Standard.


In the past one year, the non- has seen coal dispatch fall by 33 per cent. When the coal shortage commenced in August last year, the Centre had directed national miner (CIL) to prioritise the for and divert the coal from other sectors if need be.


“The situation has just deteriorated and we are scrambling for options. Bigger players are importing coal which is costlier, but smaller ones do not even have that capital. The rate of coal in e-auction by has also gone up due to increased demand,” said an executive of a steel company.


In a letter to the coal ministry, the consumers’ association said while they are not being supplied coal under the allocated quantity as per the FSA, the coal companies are conducting spot e-auctions where the spot prices have scaled up to record high levels since March ’22.


“The average bid price of coal in a recently conducted spot e-auction by (MCL) rose more than 800 per cent above the notified price. It is evident that some of MCL’s valuable customers were compelled to procure coal at such abysmally high premiums only for sustenance of their respective plants while many industries had to take a decision to be out of league in this auction due to soaring bid prices,” said the association.


Along with the decline in coal supply, the share of non-power sectors in the coal transportation by the railways has also been reducing, the latest data suggests. In April, 96 rakes of coal per day were supplied to the industries. The number reduced to 93.4 in May and in the first half of June, only 86 rakes per day have been supplied for the industry. Out of this, two-thirds of industrial is coming from more expensive imported coal. One rake typically has 58 wagons, with a carriage capacity of approximately 3,800 tonne.


The national transporter believes that it’s purely market dynamics that have shaped the inverse relationship between and industrial . “While at first glance it may seem that railways is supplying more to the power sector and curtailing industry, it is purely a function of demand and supply. from industry typically starts decreasing around this time — there’s lower energy demand and other industrial usage of coal also goes down. We have enough rake supply to cater to both power and industrial coal needs,” a railways official said, on condition of anonymity.


With the onset of monsoon, the transportation of coal typically slows down as the rains during transit could affect the weight and quality of coal. According to railway estimates, nearly 300 rakes were stabled during this time due to low .


The non-power sectors said there would be further curtailment in the coal availability due to the rains.


Recently, 10 different industrial associations wrote to the prime minister’s office asking for his intervention and that equitable coal supply should be ensured between power and non-power sectors. They said the cost of coal for these sectors have doubled as they have to purchase costlier imported coal.


Cumulatively, the demand for non-power units requires 500,000 tonne of coal every day. Executives said they were getting 350,000 tonne till March, but it’s not above 250,000 tonne now, said executives.


“Some of the captive power generation units are buying electricity from the spot market where the rates have increased on account of enhanced demand. This is causing higher cost of production for these key manufacturing sectors. Smaller players have either decided to reduce their capacity or shut down operations due to this persistent issue,” said a steel sector executive.


He said several MSMEs dependent on domestic coal have cut down their operations, thereby impacting the metal supply chain.

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