India’s coal-based power plants have recorded a continual uptick in inventory levels supported by increased supplies as the country expedites efforts to maintain adequate buffer stock in the monsoons.
As per data provided by the power ministry, coal inventory at the plants have gradually improved to a one-year high of 27.52 mnt as on 10 July, 2022, recovering from the lows of 21.94 mnt seen in April, 2022. The existing inventory is sufficient for at least 10 days of power generation in case the supplies are down.
Notably, this the highest inventory levels since July, 2021-end when the stock level had dropped to 26.95 mnt.
The power plants have witnessed steep fall in coal inventory amid unprecedented rise in power demand post-lifting of Covid-led restrictions. Incidentally, the stock levels had reduced to record lows of 11.41 mnt at the end of September 2021. Since then, these plants are in a recovery mode, requiring higher supply.
The situation got worse due to intense heatwaves in summer this year, when inventory levels plunged in April after registering stock levels in excess of 25 mnt during January-March.
Contribution from imports
The government has taken stringent measures to aid these plants. Steps include cancellation of passenger trains, curtailment in supplies to the non-power sector and directing captive miners to boost production so that the plants can ensure uninterrupted operations.
Apart from indigeneous coal, thrust was provided on coal procurement via imports in order to keep additional supplies in tap to meet the surplus demand–and it has paid dividend.
As on 10 July 2022 the power plants have build up imported coal inventory of 4.67 mnt, which is around 2.5-times higher compared to mid-May when the inventory had dropped to 1.83 mnt.
To mitigate the gap arising from domestic supplies, aggressive procurement was seen via imports as buyers made a final push to meet their restocking needs before the monsoons. This was also supported by correction in seaborne prices.
As per data compiled by CoalMint, the country’s thermal coal imports touched record levels of 20.94 mnt in June 2022, rising 63% y-o-y from 12.83 mnt in June 2021.
Impact of monsoon
The arrival of the monsoon reduces the burden on coal-based plants due to the boost in power output from the hydro power stations, but it also affects coal supplies to an extent.
During 1-10 July, 2022 the plants received coal at an average of 2.16 mnt/day, which came down from 2.33 mnt/day in June, 2022. Yet, the present supplies are higher than the consumption rate of 2.05 mnt/day.
State-run miner Coal India Ltd (CIL) is also in the process of finalising import tenders that were floated on behalf of power plants. This would help the company to cater to the demand from the power sector in case of an expected shortfall in supplies during monsoon. More importantly, it would also help to avoid risk of another round of shortages similar to last year.
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