Power plants are expected to seek higher coal supplies in order to replenish their depleted stocks at a time electricity demand has made a remarkable recovery.
Supported by a surge in economic activities amid easing of lockdown restrictions and a delayed monsoon, coal-fired generation increased 8% m-o-m to 85.28 billion units (BU) in Jul’21. However, these plants have been reluctant to take additional coal supplies.
Domestic coal miner Coal India Ltd (CIL) has registered a robust growth of 32% y-o-y to 166.96 mn t in terms of coal supply to the power sector during the first four months of FY’22. But, this growth came against a weaker base period when the demand was drastically reduced due to Covid last year.
In fact, CIL’s coal supplies have fallen to a three-month low of 38.99 mn t in Jul’21, as per data provided by the power ministry.
Besides, subdued demand was also recorded in the auctions where out of the 7.96 mn t coal offered for sale under the special forward auction scheme, only 3.27 mn t was sold.
As a result, coal stocks at the power plants (having coal linkages) have been continuously receding, which were 16% lower on the month at 24 mn t at the end of Jul’21.
What lies ahead?
Data provided by the Power System Operation Corporation (POSOCO) shows that daily electricity consumption has decreased 7% m-o-m to 4,044.45 million units (MU) during 1-11 Aug’21 against 4,333.336 MU in 1-11 Jul’21. But, the demand was recorded 10% higher than 3,687.78 MU seen in the corresponding period of last year.
As on 11 Aug’21, coal stocks at the power plants have further reduced to 20.43 mn t, which are sufficient for 11 days of power generation.
The condition might get worse if Coal India Ltd fails to supply adequate volumes to meet the rising demand, considering the fact that monsoon rains across mines are expected to affect coal dispatches.
In that case, the supply chain would be affected. Consequently, the non-power sector would be the one to suffer the most since it always gets second preference when it comes to coal supplies compared to the power sector.
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