India’s largest coal producer, Coal India Ltd (CIL), is facing difficulty in catering to the demand of the non-regulated sector (NRS) amid unprecedented rise in power demand.
Fuelled by revival in economic activities post-Covid-induced locksdowns, power generation from coal-based plants increased 10% y-o-y to 1,041.46 billion units (BU) in 2021-22 (FY22) against 950.94 BU in FY21.
To support these plants, the company’s coal dispatches to the power sector soared to a record 540.14 mnt in FY22, up 22% y-o-y compared to 443.01 mnt in FY’21. However, in doing so, its supplies to the non-power sector fell 7% y-o-y to 121.75 mnt in this period.
The impact of supply disparity was more pronounced in auction sales where the company was seen curtailing its offerings. As a result, the buyers, especially from the non-power sector, were engaged in procuring coal at higher bid prices.
Situation remains critical
With the onset of summer, average power generation from the coal-fired plants rose to 3.5 BU/day at the beginning of April, 2022 against 3.32 BU/day recorded in March, 2022.
Notwithstanding the increased demand, CIL’s coal dispatches have exhibited a declining trend over the past few months.
The miner was supplying coal to the tune of 2.05 mnt/day in February, 2022, which inched down marginally to 2 mnt/day in March, 2022. Indicating further downslide, dispatches were recorded at 1.82 mnt/day during the first 5 days of April, 2022.
Fresh round of shortages in sight?
Power being a regulated sector has always been accorded top priority in terms of coal supply. Moreover, challenges with regards to logistic constraints implies there is a limit in raising the coal supply which calls for substantial development in the existing infrastructure.
At present, coal inventory at the power plants is assessed at 25.44 mnt as on 31 Mar, 2022, down 20% y-o-y.
Demand from the power sector is likely to remain elevated boosted by higher coal consumption during the peak summer season followed by the monsoon when supplies are generally disrupted.
Any shortfall in supply might lead to fresh round of coal shortages similar to the previous year’s. To avoid this situation, the government would ensure all-out measures to provide sufficient coal dispatches to the plants, thereby depriving the non-power sector of its share.
Adding to the plight of the end-user industry, the elevated prices of seaborne coal pose a key threat to their operations, which will persist until there is substantial increase in domestic coal supply.
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