The COVID-19 lockdown in India is adding to the worries of country’s coal-fired power plants that have majority share in domestic electricity generation.
While on one hand, the slowing of industrial activities across India have directly impacted the domestic electricity consumption, on the other hand, Coal ministry wants the power plants to keep buying coal despite having enough coal stock amid low demand.
Fall in domestic electricity consumption and likely impact
According to the government data, electricity demand from industries account for over 40% of India’s annual electricity consumption, residences account for nearly a 25% and commercial establishment for less than a tenth.
As the scare of COVID-19 mounted from mid of Mar’20, India’s electricity use fell 9.2% in March, as per the provisional government data.
The highest fall in electricity consumption was recorded in consumption of electricity in the last ten days of March (when lockdown was announced) in major industrial states such as Maharashtra and Tamil Nadu fell by 20%, while power use in the western state of Gujarat fell over 30% compared to March’s first three weeks consumption, the data showed. The northern states of Punjab and Haryana, both of which are major agricultural states, saw the highest rates of declines during March, falling over 20% each.
The latest government data shows that India’s electricity consumption slumped 21.3% in the first two weeks of the lockdown ended 7 Apr’20, compared to first three weeks of Mar’20.
While the drop in electricity demand has already pulled spot power prices to the lowest level in more than two years, a severe demand fall could spell financial troubles for the ailing power distribution companies and could subsequently lead to payment delays for power generation and transmission companies.
Pressure on power plants to buy coal?
Apart from this, India’s coal ministry wants power plants to keep buying coal, despite the fall in power demand. The ministry has mentioned that power plants buying coal now is crucial for Coal India, as the state-run company’s production and supply capabilities are at their peak.
According to the government data, power plants already have coal stock of around 28 days (47.3 MnT) as on 7 April which is higher than the prescribed fuel stock level of 22 days. The further increase in coal stock would lead to surge in working capital cost for the electricity generators.
However, in order to help power generators to lift more coal from its pits, state-run Coal India (CIL) has relaxed payment norms for its customers. Customers, who had to clear payments to CIL by 7 April can now pay the company by 21 Apr’20.
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