CIL must get its act together, discoms too

By: |
October 13, 2021 4:00 AM

Gencos should have sensed power-demand rise and been ready for it; discom dues have constrained them in paying the coal supplier

Coal India 01With electricity demand up sharply, consumption of coal increased by 18% in August-September over the comparable period in 2019.

Given Union power minister RK Singh expects the problem of coal shortage to persist for up to six months, it is just as well the government is looking to step up imports. In April last year, the government had decided to go slow on imports of coal but power plants can now use up to 10% imported coal. That is a costly proposition, but the extra supply will come in handy. In the interim, it makes sense to redirect stocks of coal to states where the supplies are dwindling. Stocks at over 100 thermal power plants have been depleted. In the past 10 days or so, as much as 140 GW of capacity has been running with coal stocks for six days or less; typically, these plants would hold 15 days to a month’s worth of inventory.

With electricity demand up sharply, consumption of coal increased by 18% in August-September over the comparable period in 2019. Unfortunately, heavy rains in September hit mining activity, and to tide over the shortage, imports would be needed. Coal India Limited (CIL) has confirmed shipments of coal will increase post the Dusshera festival later this week to 1.6 million tonnes a day. But it needs to ramp up production and productivity over the next few years so as to be able to cater for growing electricity consumption. Production was up just 6% y-o-y in H1FY22. There were clear indications demand for power was rising, after Q1 recorded a more than 16% y-o-y growth, and CIL needed to have been better prepared since it supplies roughly 80% of the requirements of thermal stations.

While supplies are short, it is true several states are short of funds and are unable to pay for the coal supplies. Indeed, some part of the crisis can be traced back to distressed state-run discoms, the weakest link in the electricity chain. Discoms have been delaying or defaulting on payments, leaving the gencos in trouble. For years, they have been getting away by not paying, but now CIL has started cutting supplies to those state-run power plants whose dues are high. Supplies have been lowered to state-owned generators in Uttar Pradesh with a capacity of 5.5 GW, in Andhra Pradesh with a capacity of 5 GW and in West Bengal (3.4GW). Moreover, Rajasthan too has seen supplies of coal regulated for 2.7 GW of state-run generating capacity because of unpaid bills. Among the states that owe coal companies money are also Tamil Nadu and Madhya Pradesh. Indeed, in a recent interview with a television channel, Union power secretary Alok Kumar had observed that supplies would also depend on timely payments to coal producers. Kumar said it had been made clear to discoms they needed to shape up and settle their dues to the gencos, else they will find themselves in a spot. That rap on the knuckles is well-deserved; for too long have discoms got away with delinquent behaviour. CIL’s receivables had gone up to just short of Rs 20,000 crore in March 2021 before coming down to Rs 17,100 crore in end-July. Recently, the power ministry invoked the seldom-used tripartite agreements (TPAs) against Jharkhand, Karnataka and Tamil Nadu to recover power supply dues from their discoms to NTPC and others. Meanwhile, CIL also needs to buck up; it would be a pity if the economy’s recovery is stalled because of power shortages. Over the longer term, India must work to generate more electricity from clean fuels.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Fixing stubble burning
2Recovery taking off, but headwinds remain
3Unesco lessons for India