Coal crisis abates, but stocks may not return to normalcy soon

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October 22, 2021 2:15 AM

“Coal stocks are unlikely to improve to the previous level of 15-18 days inventory anytime soon,” the latest report by CRISIL Research said.

Coal shortage also led to daily average power prices at the spot exchanges rising to prohibitively high levels of around `15 per unit.Coal shortage also led to daily average power prices at the spot exchanges rising to prohibitively high levels of around Rs 15 per unit.

A moderate improvement in the coal supply from multiple sources, coupled with lower power demand due to decreasing temperatures, has helped in avoiding a serious electricity supply shortage situation. However, analysts feel that higher-than-average power demand and over-dependence on coal-based power plants will make it difficult for electricity generating stations to maintain comfortable levels of fuel inventory in the near future.

“Coal stocks are unlikely to improve to the previous level of 15-18 days inventory anytime soon,” the latest report by CRISIL Research said.

Higher coal usage in July-September, power plants not stocking enough before the monsoon and low alternative supply of coal have been the reasons for low fuel stock levels at power plants, which resulted in the electricity supply deficit rising to as high as 114.5 million units on October 7. Coal shortage also led to daily average power prices at the spot exchanges rising to prohibitively high levels of around Rs 15 per unit. With the abatement of the rains, supply improved with more railway rakes ferrying the fuel to power plants.

“Improvement in the availability of rakes and trajectory of power demand in March-May will be the key monitorable as coal stocks at thermal power plants will take time to top the 10-15 days mark,” CRISIL said. Temperatures begin to soar in the March-May period, “therefore, a build-up in coal inventories before end-February is crucial,” the analysts added.

The pressure on higher demand recorded in April-September had fallen more on coal-based power plants which recorded more than 19% annual rise in electricity generation. Overall coal-stock had fallen from 6 days as of September 15 to 4 days as of October 15, 2021, and remains to stay at this level. Analysts at India Ratings recently said that “the situation would normalise by end-December when coal production increases daily to around 2.5 MT”.

While average monthly power demand over the past 60 months has been 104 billion units, five out of six months this fiscal clocked growth over 10% higher than the monthly average. Demand in October-December is usually 2-3% lower than the year’s monthly average.

Thanks to around a 15% rise in capacity, power produced by renewable energy sources increased about 17% annually in the first half of the fiscal. Since renewables contribute only about 10% of electricity produced in the country, increasing generation did not have a palpable impact on the overall supply scenario. CRISIL Research estimates overall growth in power demand for the current fiscal at close to 7%.

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