Coal shortage hurts India's aluminum production

The aluminum workshops of Vedanta and Hindalco are at risk of becoming unviable due to coal shortages.

Coal supplies to power plants owned by two aluminum producers are low. Coal from the auctions is not delivered. With capacity contributing 40-45 percent to the cost of smelting aluminum, the aluminum industry is struggling to meet its coal needs due to lower rail shipments for power plants.

Under the terms listed in the fuel supply agreements, Coal India is committed to deliver 75 percent of the annual contract quantity below which the penalty is triggered. Most of the country's aluminum smelters face a shortage of coal at their power plants and operate on critical reserves. The deficit is 57 percent at the Vedanta power plant in Odisha. Bharat Aluminum is facing a 21 percent coal shortage, while Aditya's Birla Group's Hindalco is facing a 78 percent shortfall.

The Aluminum Association of India wrote to the office of the Prime Minister and the Ministry of Coal and Railways about the situation. Coal shortage hurts Hindalko, Vedanta: “Coal India must make coal available in accordance with contractual obligations and restore 100 percent coal supply. Distribution should be a priority for the optimal materialization of corporatized coal, ”says her letter.

The demand for aluminum in the country is growing by 10%. Demand is expected to get a boost from the government on Make-in-India, Smart Cities and Energy for All, defense advancements and growth potential for the auto and aviation industries.