The Hindu Business Line : Shortage of explosives may lead to cutback in coal production

ALL explosive manufacturing units located at various coal mines have stopped production since Wednesday this week following an abnormal rise in the price of ammonium nitrate, the main input used in the manufacture of explosives.

During the past one year, the price of ammonium nitrate has shot up from Rs 8,600 per tonne to Rs 12,500 per tonne. This could lead to a major cutback in coal production by Coal India Ltd (CIL).

This is because each coal mine, whether pithead or underground, requires a large quantity of explosives on a daily basis. CIL sources told Business Line that usually, the coal mines maintain an inventory stock of explosives for about 10 days. Sometimes it is even less but since the explosive manufacturing units are located near the coal mines, supplies come in every few days.

However, with the explosive units stopping production, if the coal mines do not get adequate supplies for blasting mines, coal production will be hit badly, though it is difficult to quantify, sources said.

The situation has turned precarious following the global increase in the prices of crude oil, LHS, naphtha and natural gas, which are the main feedstock for manufacturing ammonium nitrate.

Ammonium nitrate is manufactured by three public sector companies, namely, Rashtriya Chemicals and Fertilisers Ltd, National Fertilisers Ltd and Gujarat Narmada Valley Fertiliser Corporation (GNFC), apart from Deepak Fertiliser Ltd in the private sector.

However, owing to mishaps, production of explosives by GNFC is under suspension and this has led to a major scarcity in the market.

There are about 30 explosive manufacturing companies, all in the private sector, which are members of the Explosive Manufacturers' Association of India (EMAI).

CIL alone consumes around 65-70 per cent of the total four lakh tonnes of explosives produced in the country.

The EMAI Chairman, Mr A.N. Gupta, told Business Line that the explosive industry is facing an unprecedented situation owing to the high cost of ammonium nitrate, on account of which the units had to stop production. The unique aspect of the explosive industry is that its feedstock suppliers are Government companies and the buyer of the final product is again a Government company.

"We have met the CIL Chairman as well as the Coal Secretary but without any solution," Mr Gupta said.

"We have asked for increasing the price of explosives by around 20 per cent because our cost of production is now much higher that the price we realise from the coal companies. CIL has told us that since the contracts are annual agreements, nothing could be done and it could be raised only for the next fiscal. But we are facing a tremendous liquidity crunch because the PSU suppliers sell to us only on cash payment. We are now trying to take up the issue again with the Coal Ministry," he said.