Coal India curbs supplies to non-power customers, hitting industry

Workers drill at an open cast coal field at Dhanbad district in Jharkhand
Workers drill at an open cast coal field at Dhanbad district in the eastern Indian state of Jharkhand September 18, 2012. REUTERS/Ahmad Masood/File Photo/File Photo

CHENNAI, Oct 14 (Reuters) - State-run Coal India Ltd (COAL.NS) has temporarily stopped auctioning coal to non-power customers and is also reducing contracted supplies, potentially hurting companies in other industries as India battles one of its worst power supply deficits in years.

India is the world's second largest coal producer, with the world's fourth largest reserves, but a surge in power demand to above pre-pandemic levels means supplies from state-run Coal India, the world's biggest coal miner, are no longer enough.

Coal India, the world's largest coal miner by production, said in a statement that it had stopped all online auctions of coal except those meant for the power sector. An official added that supplies contracted through long-term agreements would be curtailed, although not completely stopped.

Non-power consumers include aluminium smelters, cement manufacturers and steel plants.

"This is only a temporary prioritisation, in the interest of the Nation, to tide over the low coal stock situation at the stressed power plants and scale up supplies to them," it said.

The Aluminium Association of India (AAI) on Wednesday said in a letter to Coal India's chairman, reviewed by Reuters, that some long-term contracted supplies to the industry were being stopped, and auctions for the non-power sector were inadequate.

"The entire industry has been brought to a standstill and left with no time to devise any mitigation plan," AAI said in the letter, adding that coal inventories were at alarmingly low levels and high global prices had made imports unviable.

Non-power consumers account for about a quarter of India's total coal consumption. It was not clear what proportion of this is normally provided via Coal India's auctions, nor by how much contracted volumes were being curtailed. The company did not immediately respond to a query on the matter.

India is competing against buyers such as China, the world's largest coal consumer, which is under pressure to ramp up imports amid a severe power crunch. read more

While many Indian customers have turned to local coal due to the higher global prices, India this week asked utilities to boost imports as Coal India was unable to meet demand.

Most of India's 135 coal-fired power plants have fuel stocks of less than three days.

Editing by Kirsten Donovan

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Sudarshan currently reports on the evolving energy landscape in Asia, as the region tries to strike a balance between ensuring reliable electricity supply and fighting climate change. In his previous avatar, he reported on sanctions-era global trade, human rights violations, labor movements, environmental offences and natural disasters in India for six years. During his nine years as a Reuters correspondent, he has attempted to lend a global perspective to small-town issues. Contact: +91 9810393152