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The prioritisation of domestic coal supply to the power sector has to “some extent” hit Hindustan Zinc but the company has cushioned itself by tying up imported dry fuel supply till March, a top official of the Vedanta group firm said.
Coal India, which accounts for more than 80 per cent of domestic coal output, has been prioritising fuel supply temporarily to the power sector in view of the low stock position at thermal power plants.
The annual coal consumption of Hindustan Zinc is around 2 millions tonnes and it uses the mix of both imported and domestic fuel at its smelters, HZL CEO Arun Misra Misra told PTI in an interview.
When asked if the domestic supply of coal to the company has been hit due to the prioritisation of coal to the power sector, “Yes, to some extent it is hit. So, that may be temporarily. We would see more consumption of imported coal…in another two or three months of time domestic coal should be available in sufficient quantity.”
“In terms of price … it is for the first time it has been impacted on the cost side. The cost increase is also because of availability of coal mix,” the CEO said when asked about the impact of coal shortage on the company.
Power, he said, is an important enabler for producing metals in the smelters and coal is the input to the company’s power plant.
“Roughly about 20-25 per cent of our cost of production can be attributed to the cost of coal and if you look at coal mix between 70-75 per cent is imported coal and about 20-25 per cent or 30 per cent is domestic coal. If I say between the price of coal and availability, currently to ensure production availability has to be guaranteed so we have tied up imported coal supply till about March,” Misra explained.
The government, he said, has clearly focused on energy suppliers first with regard to prioritisation of allocation.
“So at least that (is) good for us as well. Even if we suppose we were to run out of our own electricity production we would have to depend on grid and even if government gives first priority to energy suppliers in a grid in a way that power comes back to us only. So, whether the government allocates coal to us or gives power to us both ways it’s ok with us,” he explained.
But nevertheless, Misra said, the company would like some amount of more of domestic coal to reduce the cost impact.
“We have booked the coal as far as we are concerned. But the prioritisation by the government currently is more for the energy producers or electricity producers other then metal producers. So, we have protected ourselves by imported coal and whatever is available domestically we are consuming,” he said.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
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