India: Power ministry propose penalty for power plants failing to import coal

The Ministry of Power (MoP) has issued strict guidelines to power plants which have yet to place orders for coal imports for blending. Such plants will have to increase their import volumes to meet the shortfall and may face penalty in the form of curtailment in domestic supply in case necessary steps are not taken soon.

It may be recalled that the ministry had advised plants to resort to imports for blending purposes in order to ensure ample stock availability before the monsoons. This came at a time when demand for power has grown at a robust pace but domestic coal supplies have been insufficient mainly due to logistic constraints.

The requirement for blending was fixed at 10% and the plants were directed to place the orders for imports by 31 May, 2022 in such a way that 50% quantity is received by June-end, 40% by August-end and 10% by October-end.

However, citing dissatisfaction over the progress being made, MoP has increased the blending ratio to 15% for the period up to October, 2022 for those plants which have yet to initiate imports. The ratio would revert to 10% again for November, 2022-March, 2023.

Further, the ministry has also decided to curtail domestic coal allocation of such power plants by 5%, with the revised allocation expected to come into effect from July, 2022.

Imports set to rise

On MoP’s directive, the country’s largest power producer, NTPC, has floated tenders for coal imports in batches for a quantity of around 16 mnt. Moreover, various state electricity boards (SEBs) have also placed tenders for imported coal or are in the process of doing so.

As per ministry data, coal imports by the power plants for blending during FY2021-22 (till February, 2022) had fallen 26% y-o-y to 7.14 mnt. However, imports this year are expected to register a manifold increase upon receipt of shipments against the supply tenders that have been issued.

The ministry has highlighted that coal supply from domestic sources would be allocated, depending upon the availability, from June, 2022. Accordingly, the plants have been told to meet the remaining demand via imports and captive coal production.