Coal supplies zoom, but shortage at IPPs keeps power tariff high

9/10/17

Despite the increase in domestic coal supplies in the last two months, the open market electricity tariff continues to remain high.

In the last two months, domestic coal supplies increased 15-16 per cent a month. But high availability of fuel notwithstanding, the open market electricity tariff is at least 15 per cent higher than in July.

According to Coal India, total coal availability increased by a robust 8 per cent in the first half of this fiscal to 269 million tonnes. In September alone, the supplies increased by nearly six million tonnes.

Barring Singrauli-based Northern Coalfields Ltd, which reported nearly 17 per cent growth in production during April-September 2017 period, higher supplies were achieved through dilution of pithead inventory. Total production remained flat 231.87 mt as against last year’s 230.04 mt.

That is good news for CIL which reported a huge 68.42 mt stock at the beginning of this year, due to consistent focus on production growth vis-a-vis low demand for fuel. As of October, the stock is down to 31 mt, significantly lower than the corresponding period of the previous year.

Coal stored in pithead deteriorates in quality and energy value. Also it leads to over reporting of stock and the associated corruption.

As a corrective measure, CIL went slow on production till July. However, spiralling of demand beginning August saw the company pulling up its socks and in September, production grew by a robust 10 per cent to 38.77 mt.

Coal India continues to meet the demand for fuel and is ready to meet the future demand during the course of the year. But such comfortable domestic fuel availability scenario has failed to bring down the open market electricity tariff.

Electricity tariff’

At the IEX, the average tariff increased from 2.5 per kilowatt-hour (kWh) to 3.1 per kwh in August and 4.1 per kWh in September. As on October 3, the round-the-clock average in IEX was 4.26 per kwh with peak tariff touching ₹7.80 per kWh.

This is despite significant overcapacity on the generation front, as is evident from the barely 60 per cent plant-load factor in 219 GW thermal generation.

Considering that the coal-based capacities are designed to achieve a minimum of 85 per cent PLF, approximately 55GW capacity is unutilised. Even if the old plants are kept out of the reckoning, the over capacity is significant.

Fall in coal imports

A clue to this puzzle may lie in decline in coal imports.

According to IHS McCloskey, thermal coal imports are down by nearly 10 mt to 60.85 mt during April-August period as against the same period last year. The decline is attributed to the Centre asking the State-owned generators to stop imports.

It means nearly half of the increased domestic supplies are used in mitigating the gap in coal imports. CIL sources confirm that a good part of the increased supplies are directed to the State-owned generation sector.

The net result is, fuel crisis does persist at the IPP level. However, if the open market tariff remains high, private sector generators may step up imports. As an early indication coal import increased by 5 per cent in August when compared to July.

Discoms suffer

Meanwhile, Discoms are paying a high price for dumping power purchase agreements in favour of open market purchases in the last there years. They are now finding open market electricity too hot to handle.

According to the Central Electricity Authority, Uttar Pradesh, Haryana, Chhattisgarh, Madhya Pradesh, Maharashtra, Kerala, Bihar, Assam and Tripura witnessed sharp rise in peak shortages during August year as against the same month last year. Ironically, Chhattishgarh and Tripura are net power exporters.

Source: The Hindu Business Line