Rising Coal Stock: A Boon or Curse?

Coal stock available at the thermal power stations have risen to an unprecedented level, where elevated production has helped them to accumulate higher coal volume during the summer season.

Data provided by CEA indicate that coal stock at the power plants (having linkages) has reached 42.49 MnT as on 25 Mar’20, which is enough to produce electricity for 25 days without needing any supply from CIL.

Despite the preventive measures taken to combat COVID-19 country-wide, the miners at CIL have shown no signs of slowing down as the deadline for annual target approaches fast.

Recently, the coal major had attained its highest ever single day output, however, amidst a lower electricity demand, the same promptness has not been seen to lift coal at the plant’s end. As on 23 Mar’20, CIL had produced 2.828 MnT, but the dispatch for the day was only recorded at 1.694 MnT.

Data recorded for 23 Mar’20

Notably, only 240 coal rakes were transported against the daily planned target of 310.6 in Mar’20.

The company’s production volume has been lagging behind the corresponding dispatch for most part of FY20. However, as a result of the valiant effort made recently, the production has surpassed the total dispatch till date.

The India government has instructed power utilities to ensure uninterrupted operation of generation and transmission units at this crucial time, nevertheless the production cut enforced by Industrial sector has drastically brought down the electricity requirement.

Peak power demand in the country declined by 22% to 127.96 GW on 25 Mar’20 compared to 163.72 GW on 20 Mar’20, showing the impact of lock-down amid COVID-19 outbreak.

This led to the question that whether the tremendous amount of coal is required at a time when the combined stock (at CIL and power houses) has already breached the 100 MnT mark.

CoalMint has listed some of the pros and cons this situation can behold in the near-term.

Benefits:

(a) Reduction in Imports: The high inventories would put a halt on imports taken by utilities to run their operations.

(b) Elevated supplies to non-power sector: coal supplies of non-power sector is often overlooked to meet the requirement of the power plants. Now with the utilities equipped with adequate coal, CIL can take this opportunity to elevate supplies to the non-power sector.

Besides, lower rake movement for coal would also facilitate higher movement of other commodities.

Drawback:

Despite boosting the domestic coal availability, higher coal stock can adversely affect the coal scenario in the country as witnessed few years back.

During 2017-18, higher accumulation coal at pit-head mines had forced CIL to lessen its production in order volume. The plan had back-fired when sudden outage of hydro power saw thermal plants increasing their consumption to run out of coal. CIL would be hoping that no such case arises this term.

It is difficult to access the lingering effect of COVID-19, but it is likely that the government would take effective measures to balance the supply-demand dynamics.