Increasing power demand has compelled the government to reconsider its stance towards imported coal procurement so as to ensure smooth operations at thermal power stations ahead of the peak summer season.
In a new directive, the Ministry of Power (MoP) has instructed power plants to resort to imports by procuring 6% (by weight) of their needs for blending with domestic coal till September 2023, failing to which curtailment in domestic supply has been proposed.
A similar order was issued back in May last year when coal imports were mandated against a blending ratio of up to 10% to bolster inventories at power stations.
However, the burden on power producers was reduced after MoP lowered the import targets in tandem with improvement in domestic supplies post monsoon, which had resulted in gradual recovery in coal inventory levels.
The need for imports has again resurfaced due to the recent surge in power consumption and demand which has led to an increase in the share of coal-based power generation.
As per data provided by Grid India, average power consumption during 1-9 January, 2023, has increased 12% to 4,085 million units/day (MU/day) as against 3,633 MU/day recorded in January 2022.
The power controller has informed that energy demand has increased sharply and is expected to remain at elevated levels during H1FY24 (April-September, 2023).
Coal requirement
The fourth quarter of the financial year (January-March) is usually the peak season in terms of coal output as domestic miners ramp up production taking advantage of favourable weather conditions.
However, logistics issues pertaining to rake availability remain a constraint toward augmenting coal supply to power plants. Hence the ministry has emphasised on raising imports to ease the supply pressure.
This holds significance especially in view of the upcoming summer season which is accompanied by higher coal burning followed by the monsoon season when mining operations are generally impacted.
The Central Electricity Authority (CEA) has estimated that domestic coal supply of 392 mnt during April-September, 2023, is expected to fall short of demand by 24 mnt. This shortfall is likely to be made up by blending with imported coal.
Coal imports by power plants have been rising largely driven by aggressive procurement during the peak summer season. As per data provided by MoP, imports surged 113% y-o-y to 42.02 mnt during April-November, 2022. Indicating strong demand, the total volume of imports in FY22 was already surpassed during the first five months of FY23.
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