Severe coal shortage hits captive power plants

Captive power plants for producing different metal-based plants have sent SoS to the Ministry of Coal as they are forced to run at 50% capacity due to severe shortage of coal since April this year.

The  Indian Captive Power Producers’ Association (ICPPA), which is the apex body of captive power producers (CPPs), have also alleged that Coal India Limited (CIL) was not honouring fuel supply agreement (FSA) for supplying coal. These plants have an installed capacity of about 40,000 MW. Captive power plants are linked to mostly metals sector like aluminium, iron and steel, zinc and also chemicals, paper, cement and textiles.

These power plants require 190 million tonne (MT) of coal annually for their operations for which they were given commitment for 78 MT during April-November. However, they could get only 9.36 MT, which is just 12% of the commitment, thus a shortfall of 88%, said association secretary Rajiv Agarwal. He said, as a result, these plants had to import only 1-2% coal during this period last fiscal (2016-17), but this fiscal, this percentage has gone up to 25%.

Association president Rahul Sharma said: “Most of the CPP-based industries are facing severe coal shortage and struggling even to maintain critical stock level. Reduced power generation is rendering operations economically unviable with huge risk of plant closure.” Sharma added: “We have apprised the Ministry of Coal about the situation which calls for urgent attention.”

“Earlier too, we had faced a huge problem on coal supply, but the situation improved with the timely intervention of the government. However, since April this year, the coal dispatch has stymied and even though the coal was available, we have not been allotted rakes and independent power plants (IPPs) were preferred on dispatches,” he said.

Sharma said he had several rounds of meeting with officials of the Ministry of Coal. “We were assured that the coal availability situation would improve after Diwali. However, the situation on the ground continues to be the same,” he added.

Due to non-supply of coal, these power plants are forced to procure coal from alternate sources in spot market at high prices,  further aggravating the financial burden.

The issue of coal shortage was raised in Lok Sabha this week, following which Union Coal Minister Piyush Goyal admitted there was a drop in the coal stock position with the thermal power plants. He said it was primarily due to failure on the part of power houses to stock adequate coal during the lean period and unexpected spurt in demand for thermal power arising out of drop in power generation from other sources like nuclear, hydro and wind energy during the second quarter of 2017-18. He also blamed the abnormally heavy monsoon in mine areas for the reduced coal production, its loading and transportation.

The Minister, however, said with increased coal dispatch from CIL sources and continuous monitoring, the situation of coal stock has improved.

Besides the problem of unavailability of coal, the CPPs are also suffering from financial pressure as the CIL subsidiaries are taking advance payments / bank guarantee against allotment of coal but not dispatching as per allotment, blocking funds for more than six months. Due to non-supply of coal, these power plants are forced to procure coal from alternate sources in spot market at high prices, further aggravating the financial burden.

According to Sharma, these plants are getting average 50% coal against secured linkages and annual contracted quantity (ACQs). Sharma said the CIL should make coal as per contractual commitment of FSA and ensure 100% coal supply.

This is to be noted that there is direct correlation between industrial growth and CPP growth. Industrial production growth declined by more than half to 2.5% in the first seven months of current financial year, as against 5.5% during the corresponding period of  2016-17.