Rise in demand, high price of imported coal disrupts supply

Unprecedented increase in demand of electricity due to revival of economy, heavy rains in coal-mining areas in September this year, increase in prices of imported coal and non-building of adequate coal stocks before the onset of monsoon are the main reasons behind depletion of coal stocks at power plants. As per sources, there are also legacy issues of heavy dues of coal companies from certain States — Maharashtra, Rajasthan, Tamil Nadu, Uttar Pradesh, Rajasthan and Madhya Pradesh,

The sources said that a surge in revival of economy after second wave of Covid, led to unprecedented increase in demand and consumption of electricity. The daily consumption of electricity has crossed beyond 4 Billion units per day and 65 per cent to 70 per cent demand is being met by coal fired power generation only, thereby increasing dependence on coal. Power consumption for the period August-September has progressively increased from 106.6 Billion Units per month in 2019 normal non covid year to 124.2 Billion Units per month this year. During this period the share of coal-based generation has also increased from 61.91 per cent in 2019 to 66.35 per cent in 2021. As a consequence, total coal consumption in the month of August-September, 2021 has increased by 18 per cent in comparison to corresponding period in 2019.

Meanwhile, imported coal price of Indonesian coal jumped from $60/tonne in March to $200 in September/October of 5000 GAR (Gross as received) coal. The imports decreased in comparison to 2019-20 due to import substitution and rising prices. The reduction in imports is compensated by the domestic coal for power generation, hence increasing the demand for domestic coal further. In the last week of August 2021, plant outages on account of coal shortage were reported for a capacity of about 13 thousand Mega Watt which led to increase in power exchange prices up 20 rupees per kilowatt hour. After intervention of Core Management Team, now the outage has come down to 6 thousand 960 Mega Watt and power exchange prices are at about 7 rupees per kilowatt hour.

As coal consumption by thermal power plants is likely to exceed 700 Million Tonnes this Financial Year 2021-22, a comprehensive strategy has been prepared by Ministries of Coal, Power and Railways to remove logistic bottlenecks in order to sustain high demand and consumption of coal by power plants. An inter-Ministerial sub-group led by the Ministry of Coal has been monitoring the coal stock situation twice a week. In order to manage the coal stock and ensure equitable distribution of coal, the Ministry constituted a Core Management Team (CMT) on August 27 comprising representatives from MOP, CEA, POSOCO, Railways and Coal India Limited (CIL) to ensure daily monitoring.Ministry of Power has advised Central Electricity Authority to specify the mandatory coal stocks to be maintained by power plants both at pit-head and non-pit heads. There would be a provision of disincentives for those plants who do not maintain their mandatory coal stocks and they would be kept in lower order of priority for coal dispatch. Those Gencos who do not clear dues of coal companies, may be kept at the lowest order of priority for coal dispatch. In fact grading of Gencos would be carried out based on coal stocks maintained by them as well as regular payments to coal companies. Those Gencos higher in the grading would be given priority in coal allocation and dispatch.Moreover, in consultation with Ministry of Coal, coal supply would not be restricted to the annual contracted quantity of power plants but plants would be given coal as per their actual requirements. Those plants coming higher in Merit Order Dispatch as per Security Constrained Economic Dispatch would get more coal.