Indian power plants are facing an uphill task in increasing their coal inventories with the peak summer season round the corner.
As on 20 Feb’22, the inventory was assessed at a 7-month high of 25.66 mnt, but it was still marked 21% lower than the year-ago levels.
Driven by abrupt rise in power demand, coal stock at the plants had fallen to a 3-year low of 11.41 mnt at the end of Sept’21. Since then, the power plants have been in recovery mode.
The stock replenishment gradually picked up momentum with an increase in coal supplies. Notably, plants had accumulated 5.86 mnt of coal during Nov’21, but the pace slowed down in the ensuing months with a revival in power demand.
In fact, since the end of Jan’22, a mere 0.26 mnt of coal has been added to the power plant’s coal inventory.
Growing dependence on coal-based power
While the coal-based power plants are struggling to keep pace with the rising demand, the burden on these plants was compounded by lower generation from the alternate power sources.
Incidentally, with the departure of monsoon, a steady fall has been witnessed in hydro-power generation, which registered its lowest output of 7.63 billion units (BU) during Jan’22 in the current fiscal. Besides, power generation from nuclear plants was down 11% m-o-m to 3.97 BU in Jan’22.
To compensate for the generation loss, coal-based power generation increased 3% m-o-m to 90.83 BU in Jan’22, thus registering its highest output since Apr’21.
Source-wise conventional power generation
Source: Power Ministry | Quantity in BU
Implication
Currently, the power plants are supplied coal at an average of 2.2 mnt/day against consumption of 2.04 mnt/day.
With the arrival of summer, coal consumption would gradually increase thereby requiring additional supplies from the domestic miner, Coal India Ltd (CIL). Both private and state-run plants are continuing to place more emphasis on domestic coal especially in view of the elevated imported coal prices.
As a result, coal supplies to the non-power sector would remain under pressure. This also means further curtailment in coal offerings via the auction route as CIL would prioritize coal dispatches through long-term fuel supply agreements (FSAs) to meet the power sector’s demand.
During the first 10 months of FY’22 (Apr’21-Jan’22), coal offered in various auction schemes was down 61% y-o-y to 154.22 mnt compared to the bulk of 400.56 mnt in the corresponding period of the previous fiscal.
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