Captive Power Units turn to Russia as domestic coal supply fails to resume
Chennai-based India Cements has said that the company has already imported two shipments of Russian coal due to the shortage of domestic supply
Reeling from domestic coal shortage, the captive power plants (CPP) have resorted to importing coal from Russia and shift to grid power supply. Despite that, their condition is worsening as close to 30 per cent of the CPPs’ across the country are shut as they battle nil domestic supply for a year now and most of them are unable to procure costlier imported coal.
Steel, cement, metals and allied industries build their own power plants (captive units) to cater the energy demand of the manufacturing process.
Chennai-based India Cements has said that the company has already imported two shipments of Russian coal due to the shortage of domestic supply. “Most of our plants have coal based captive power generation. The cost of captive generation is now more than the grid cost. Hence, we shut down all captive power units and resorted to grid power,” said N Srinivasan, Vice-Chairman and Managing Director, India Cements.
During the last quarter, India Cements saw a 54 per cent rise in power and fuel cost alone. According to producers, the cost of power from captive units went up to as high as Rs 10 a unit, compared to Rs 7 a unit for grid power.
From the steel industry, players like Jindal Steel and Power Ltd (JSPL) and Arcelormittal Nippon Steel India had reportedly imported coal from Russia. India Cements indicated that though cement majors can import from countries like Australia, Indonesia or South Africa, the discounts on Russian coal are making it more attractive for the industry.
Representative body, Indian Captive Power Producers’ Association (ICPPA) told Business Standard, coal-based captive power plants have either stopped generation due to coal shortage and high cost of operations, or shifted to buying power from the grid or coal from the global market.
“Almost 30 per cent of CPP generation has shifted to grid in the last few months. CPPs, which are away from pitheads, are suffering the most and the Indian Railways is not supplying them with rakes,” said Rajiv Agarwal, Secretary General, ICPPA. Shift of power demand of the CPPs on grid leads to demand surge for that state which in turn leads to more pressure on the domestic coal supply.
India has a total installed CPP capacity of 78,000 mega-watt (MW), out of which 40,000 MW or 55 per cent are thermal-coal based, which require around 200 million tonnes (MT) coal per annum. According to ICPPA, close to $30 billion worth of investment across CPPs in the country and close to 1.5 million workers are employed directly and indirectly in this sector.
Coal-Mint, a coal price reporting agency recently said, India procured 2.06 million tonne of coal from Russia, making it our third largest supplier. Overall Indian coal imports, including shipments of anthracite and PCI coal, were nearly 10 per cent lower in July at 23.8 million tonnes, compared with record imports of 26.29 million tonnes in June.
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.
Since August last year, when the coal demand supply mismatch started, the non-power sector including CPPs has seen coal dispatch fall by 33 per cent. When the coal shortage commenced in August last year, the Centre directed the national miner Coal India Limited (CIL) to prioritise the power generation units for coal supply and divert the coal from other sectors if need be.
“Since then, the situation has just deteriorated and we are scrambling for options. Bigger players are importing coal which is costlier, but smaller players do not even have that capital. Rate of coal in e-auction by CIL has also gone up due to increased demand,” said an executive of a steel company.
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