According to a Power Ministry report, the total thermal power capacity under outage owing to low coal stocks fell to 6 GW (Gigawatts) on Wednesday, down from 11 GW on Tuesday.
On October 12, the country’s thermal power plants had an average coal stock of four days, compared to the required 15-30 days inventory levels based on plant distance from coal supply.
Low coal inventory has been attributed to a surge in power demand as the economy recovers from the Covid-19 outbreak, high international coal costs, supply-side challenges, and insufficient coal purchase by facilities in the April-June period.
On October 13, purchase bids in the India Energy Exchange’s (IEX) Day-Ahead Market were for 392,210 MWh (Megawatt-hours), up from 173,624 MWh a month before.
The exchange’s average market clearance price was Rs 13.13 per unit (KWh), up from Rs 2.62 a month ago.
Why is India running out of Coal Supply?
Despite having a substantial coal reserve, India is the world’s third-largest coal importer.
Imports have dropped considerably due to a widening disparity between surging international coal prices and domestic coal prices.
In July and August, power plant coal imports plummeted by 45 percent compared to the same period last year, while India’s non-power industries became more reliant on domestic coal.
According to CRISIL’s Gandhi, supply delays owing to the pandemic and logistics concerns hampered coal imports even then.
As the international economy slowly recovers from the pandemic, transportation costs rise due to increased cargo demand and port congestion.
In India, the state-owned Coal India sets the majority of coal pricing. As a result, domestic prices do not rise as much when foreign prices rise since increased costs would affect electricity rates and inflation, which utility firms cannot pass on to most consumers.
The severity of the Situation?
The coal scarcity resulted from a sudden increase in electricity consumption as the economy recovered from the pandemic. August’s total power demand was 124 billion units, up from 106 billion units last year.
A dramatic spike has aggravated the coal shortfall in international coal prices due to a shortage in China and low stock accumulation by thermal power plants in the April-June timeframe.
Coal delivery to thermal plants was also slowed in September due to heavy rains in coal-bearing areas.
Coal and lignite-fired thermal power plants make up around 54% of India’s installed power generation capacity, generating roughly 70% of its electricity.
Government’s Response
Officials from the power, coal, and railways monitor coal supplies to thermal plants and have taken steps to enhance daily coal shipments to power plants.
On Wednesday, coal minister Pralhad Joshi tweeted that daily coal exports to thermal power plants had surpassed 2 million tonnes, compared to a daily requirement of roughly 1.87 million tonnes on October 1
The electricity ministry has allowed power generators utilizing local coal to utilize up to a 10% blend of imported coal to boost coal stocks.
Even though international coal prices are approaching record highs, the government predicts that a 10% blend of imported coal will result in a 20-22 paise rise in the cost of power generation per unit (kilowatt-hour).
According to officials, generators may seek to raise the price they charge doesn’t under Power Purchase Agreements with power distribution firms. These companies are now addressing power supply shortages by acquiring power at much higher prices on power exchanges.
On October 12, purchase bids on the India Energy Exchange’s (IEX) Day-Ahead Market (DAM) were for 430,778 MWh (Megawatt-hours), up from 174,373 MWh a month before.
Purchase bids considerably outstripped supply, resulting in a market-clearing price of Rs 15.85 per unit, up from Rs 2.35 a month ago.
