scorecardresearchHow shortage of coal is affecting non-power industries
India total coal production in 2021-22 was 7,770.23 lakh tonnes, up by a significant 8.5 per cent from 7,160 lakh tonnes registered in 2020-21.
India total coal production in 2021-22 was 7,770.23 lakh tonnes, up by a significant 8.5 per cent from 7,160 lakh tonnes registered in 2020-21.

How shortage of coal is affecting non-power industries

Updated: 05 May 2022, 08:21 AM IST
TL;DR.

India's non-power sectors are facing coal shortages as the supplies have been diverted to coal-based thermal power plants, which are trying to meet the peaking power demand from the manufacturing sector.

India's total coal production in April 2022 touched 661.54 lakh tonnes, Coal India and its subsidiaries produced 534.7 lakh during the month.

The Coal Ministry said, “Coal India has achieved the highest production of 534.7 lakh tons during April this year indicating 6.02 per cent growth.

Coal India’s production went up by 4.43 per cent from 5,960.24 lakh tons in 2020-21 to 6,220.64 lakh tons during 2021-22.

The country's total coal production in 2021-22 was 7,770.23 lakh tonnes, up by a significant 8.5 per cent from 7,160 lakh tonnes registered in 2020-21.

But despite high coal production, India's non-power sectors are facing coal shortages as the supplies have been diverted to coal-based thermal power plants, which are trying to meet the peaking power demand from the manufacturing sector.

The following are some non-power industries that are expected to be impacted by the coal shortage.

Iron

Sponge iron units of the country are facing an acute coal shortage, said an industry official to Financial Express.

Of the 450 direct reduced iron (DRI) units that produce sponge iron in the country, 105 are located in Chhattisgarh. All units have just 10 days of stocks compared with 60 days normally. "The situation is not any better in units located in other parts of the country," said Anil Nachrani, president of the Chhattisgarh Sponge Iron Manufacturers’ Association to FE. 

India’s sponge iron capacity currently stands at 35 million tonnes per annum (mtpa), of which 16 mtpa is produced in Chhatisgarh alone. Sponge iron is used mainly by secondary sector steel producers in the induction or electric arc furnace to produce ingots and billets, which are primary inputs to produce rebars mostly used in the construction sector.

Nachrani blamed state-run Coal India’s (CIL) inadequate distribution infrastructure for the current shortage. It takes 1.65 tonnes of coal to produce one tonne of sponge iron. He also said CIL should allocate more coal to the secondary steel producers.

Aluminium

Indian aluminium producers are facing severe coal shortages as the supplies have been diverted to coal-based thermal power producers.

Indian state-run aluminium producer National Aluminium Co. Ltd. (Nalco) is facing coal shortages as some of the trains are being diverted to priority electricity generation.

Daily supplies to NALCO were falling short of requirements by at least 5,000 tonnes due to the train shortage, a senior company official told Reuters.

Aluminium is a highly power-intensive industry, with coal accounting for nearly 40% of production costs, and in order to reduce reliance on the grid, around 9,000 megawatts of captive power plants have been established to meet critical power supply needs, sources said.

Without coal, these captive power plants cannot be operated, and power cannot be supplied, thus impacting the entire production.

Steel

The demand for coking coal is growing at a faster clip, and India imports the bulk of its requirements from Australia.

April imports of coking coal are estimated by Kpler at 4.66 million tonnes, down from 6.17 million in March but in line with February's 5.01 million and January's 4.91 million.

Coking coal prices skyrocketed. Australian coking coal on the Singapore Exchange has risen in recent months, reaching a record high of $635 a tonne on March 10, Reuters reported.

This has pushed steel makers to increase steel prices. The top private sector steel makers have increased the prices of hot-rolled coil (HRC)-a benchmark for flat steel-by 4,000-5,000 a tonne.

India meets 85 per cent of its coking coal requirements. While Australia remains the main buying destination, some of the requirements are met by countries like South Africa, Canada, and the US.

Metallurgical coal also called met coal or coking coal is a type of coal that is used in the production of steel. It is of a higher purity than thermal coal which is used in energy generation.

Brick Kilns/Cement

The bulk of brickmakers in the country rely on imported coal as a source of energy. With international coal costs skyrocketing, brickmakers may have to rely on domestic coal supplies.

According to media reports, global coal prices, which shot up by about 35% in the fourth quarter to touch $320 a tonne after multiple ascends during the last financial year, pushed the per tonne cost of clinker production up by 2-2.5 times. The prices of global pet coke rose by over 50% in March, compared with the average prices recorded during December-February, and those of the domestic variety rose by about 22% in March (from December-February).

Petcoke is widely used by the cement industry. The sharp increase in raw material prices will continue to impact cement manufacturers.

Frozen Food

Power outages are expected to have a major impact on the frozen foods industry as it is among the most vulnerable sectors. A report from the Economic Times shows that power shortages in over six years have resulted in a loss of sales momentum for summer products such as ice creams, soft drinks, frozen foods, and medicines. Moreover, small-to-mid-sized retailers are refusing to stock large inventories of frozen or cold products due to a lack of power backups and long power cuts.

Paper and Pulp industry

The pulp and paper industry has been impacted by a coal shortage for several months. As a result, several paper mills' production processes have been badly affected, and others are on the verge of closing down.

The industry has requested priority allocation of coal and railway rakes for captive power units.

Paper and paperboard are used in almost every part of life, and their manufacture is essential for education, packaging, and a variety of other industries.

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First Published: 05 May 2022, 08:21 AM IST