10% power plants still vulnerable to coal shortage

The acute coal shortage faced by thermal power plants in India in the last few weeks is showing signs of easing with power consumption reducing due to widespread rains and coal supplies increasing following increased production by Coal India.

According to the Central Electricity Authority’s (CEA’s) fuel management division, 135 plants with a capacity of 1,65,066 megawatt (MW) — which require 17,92,900 tonnes of coal a day —has a stock position of 86,49,600 tonnes as on October 25, 2021, enough for five days of uninterrupted power generation. While 16 pithead plants (close to mines) with 35,200-MW capacity have adequate fuel for six days, 119 non-pithead plants with nearly 1,30,000-MW capacity have stocks for only four days. Daily coal needs are calculated based on the maximum requirement for average actual consumption of the plant for the last seven days or requirement for installed capacity of the plant at 55% plant load factor [PLF}.

The data also shows nine plants with 9,280-MW capacity had no stocks as on October 25, whereas 13 others with 17,770-MW capacity had stocks for a day. Around 38 plants with nearly 48,000 MW of capacity have two-three days of coal stock, and another 29 plants with 32000-MW capacity had stocks for four-five days.

Capacity Issues

About 10% of the 209-GW (20 GW) capacity of coal-based thermal power generation companies in India remains vulnerable to outage amid surging demand for coal, despite the recent dip in demand (almost 10% over October 16 and 17) due to heavy rains. Shortage of coal persists with inventory at five days for these plants, according to an analysis by CRISIL. “We expect high global coal prices to make imports dear and domestic e-auction premiums to remain elevated over the next few months, till supplies stabilise. In this milieu, 20-GW private capacities (out of 209 GW of coal-based capacities) will be the most vulnerable as these depend heavily on the open market or imports for coal, and most have committed tariffs for the power sold to utilities,” said Ankit Hakhu, director, CRISIL Ratings. If these gencos continue operations at these elevated coal prices, it may lead to operating losses and they may prefer to shut down till prices cool, he says.

Though coal stocks have started improving at power stations (4.5 days of stock now against 3.9 days of stock 10 days ago), stocks still remain below normative levels (Non-pithead units with less than seven days of stock are assumed to have critical stock), estimate sector analysts with Emkay Research. According to them, energy demand in India is usually 5-8% lower during the second half of any financial year due to winter in most parts of the country, and hence there is unlikely to be any substantial increase in power demand as seen during the June-October period of 2021.

Rising Domestic Supplies

Sources said over 90% of coal produced by Coal India mines were diverted to power plants in the last couple of weeks following the fuel crisis. Coal India has about nine mining companies in India and of them Mahanadi Coalfields (MCL) in Odisha is the largest. Mahanadi Coalfields despatched a record 5.56 lakh tonnes of coal on October 22, loading 99 rakes of coal (each rake with about 59 wagons) —59 from Talcher Coalfields and 40 from IB Valley in Orissa. Mahanadi Coalfields had produced 4.98 lakh tonnes of coal on October 17 and loaded 103 rakes despatching 5.47 lakh tonnes of coal on October 17. Coal India had also deployed four-kilometre long rack trains with four engines on war footing to counter supply issues. The company normally produces about 13-14 lakh tonnes of coal during the rainy season and 19-19.5 lakh tonnes in other seasons. ‘’Around 60% of Coal India’s annual production happens in the second half of the year, though 53% of the annual volume is consumed in the first half. Coal India’s off-take during H1FY22 has seen a two-year CAGR of 6%, while production has seen only a two-year CAGR of 2%,” according to the Emkay analysts.

There are multiple reasons for the coal crisis, sources added. Global coal prices have surged significantly due to supply issues in China (due to increased safety inspections and mine closures), heavy rains in Indonesia and South Africa, and higher gas prices. South African coal prices increased from $70 to $200 between January and October. As a result, generation at imported coal plants in India was impacted and the supply of power under PPAs by import-based plants was down by 30% in the first half of the year.

Domestic coal-based plants generated 24% additional power, whereas production from imported coal dependent plants have gone down to minus 30%, coal secretary Anil Kumar Jain said at a mining conclave in Ranchi on Monday.