Demand growth squeezing availability of coal despite increase in production

27th aug 2018

The expectation was coal supply at power plants will improve during July-August, riding on adequate availability of hydro-electricity.

But as the monsoon is nearing its end, the average coal stock at power plants stagnates at 10 days. The improvement, if any, is the number of power stations having less than seven days’ stock has reduced by half to 14.

This is despite a 11 per cent rise in coal despatches and hydro electricity generation exceeding targets, so far this year. Normally coal production hits a low during the monsoon. But not this year as Coal India reported a 13 per cent production growth till last week.

“The known patterns of electricity demand have changed,” said a coal official. The change is evident in strong price for electricity in the open market. On Friday, IEX reported a round-the-clock average tariff of ₹3.58 a kilowatt-hour with peak tariffs crossing ₹8.

Clearly, the demand has been stronger than ever. While that’s good news for the economy, the bottomline is India will continue to suffer from coal shortage for time to come. The shortage may not be as acute to the power sector which is receiving 90 per cent of the total supplies.

But other industrial consumers will suffer both in terms of availability and cost. They witnessed a sharp cut in supplies since last year. Some of CIL’s mining subsidiaries haven’t despatched a single rake to non-power customers till July.

Rail logistics

CIL is of course looking forward to step up production from end September as the rains ease. The aim is to enhance the daily production rate from roughly 1.5 million tonne to two million tonne by October. But it is questionable if that will create a surplus because less rain also mean less supply of hydel power and higher demand for thermal power. That India is heading for elections in States and in the Centre may add to the demand profile.

Meanwhile it’s good times for power producers. According to Association of Power Producers, IPPs (excepting those 20GW worth of capacities lying idle due to lack of PPAs) are recording more than 60 per cent PLF — highest in the last couple of years.

But, there is a catch to the story. Stations which are closer to the pit head are making the most, as the government is focussed to supply fuel to such stations on priority basis due to constraints in rail logistics.

The expansion in transmission capacities and establishment of national grid over the last couple of years is paying off. “There are problems linked to fuel distribution but not electricity supply,” said a source.

Source: THE HINDU BUSINESSLINE