Government order on coal supply may hit non-power sectors

Government order on coal supply may hit non-power sectors

News

1. The Non power sector companies raise their concern over government’s decision to prioritise coal supply to power plants.

Important Facts

1. The government’s decision to prioritise coal supply to power plants will impact other industries dependent on coal such as cement and aluminium.
2. To address the shortage of coal with power plants government has instructed the companies such as Mahanadi Coalfields Limited (MCL) to supply coal only for power plants.
3. According to data with the Central Electricity Authority, 17 power plants had super-critical (less than three days worth) of coal stocks while three power plants had critical (less than five days worth) of stocks.
4. The Railway Board instructs all zonal railways on May 18 about loading of coal for power houses (i.e. plants of Central/State power utilities and IPPs) from goods sheds should be accorded higher priority till June 30, 2018. These instructions were made applicable from May 19 onwards.
5. The CPP (captive power plant) consumers have signed fuel supply agreements (FSA) with CIL (Coal India Limited), which is a legally binding agreement with long-term coal supply assurance and hence abrupt stoppage of supply will bring the industry to a grinding halt.
6. Captive power plant Association said that CIL’s coal supply to independent power producers (IPPs) had grown every year and by as much as 8.1% in 2017-18. But the supply to captive power plants contracted by 6.2% in 2016-17 and saw no growth in 2017-18.
7. Stoppage of supply of coal to power industry would have a severe impact on the downstream industry like transmission and distribution, packaging, cement, consumer products, paper, tyre manufacturing, resulting in a loss of jobs for millions.
8. Analysts blame government for its laxity regarding maintaining critical stocks and its untimely decision to stop all coal imports for power generation which increase the pressure on domestic supplies.
9. Non power sector companies accuse the government to stop the supply of coal abruptly with a notice of few hours. Government doesn’t follow the normal practice of informing one month prior to make alternate arrangements.