Power cut: Large section of plants facing disruption over depleting coal stocks

By: |
August 25, 2021 4:30 AM

According to government data, units with combined capacity of 90,000 mega-watt (MW) have fuel stocks that would last for less than eight days. Of this, a capacity of 20,000 MW is hamstrung as Coal India (CIL) is withholding fresh supplies demanding that past dues be cleared.

Coal companies have to moderate production according to offtake, as coal cannot be stockpiled beyond a certain quantity without the risk of catching fire.Coal companies have to moderate production according to offtake, as coal cannot be stockpiled beyond a certain quantity without the risk of catching fire.

Even as electricity demand is rising in conjunction with an incipient revival of business and economic activities post the second Covid wave, a large section of power plants in the country are precariously placed with fast-depleting coal stocks. According to government data, units with combined capacity of 90,000 mega-watt (MW) have fuel stocks that would last for less than eight days. Of this, a capacity of 20,000 MW is hamstrung as Coal India (CIL) is withholding fresh supplies demanding that past dues be cleared.

CIL’s net receivables were as high as Rs 17,100 crore at the end of July. Speaking about outstanding receivables in the Q1FY22 earnings conference on August 12, Pramod Agarwal, chairman and managing director, had said, “We will try to reduce (receivables) further in the coming months and we are putting constant pressure on the buyers.”

Among the plants with less than eight days’ stocks, generating units of more than 22,000 MW have already received more coal that they are supposed to get under contractual terms. As much as 31,000 MW of plants have received more than 92% of coal than their contracted quantities.

Rise in power demand in the recent past is ironically proving to be a bane to power plants in need of coal. Monthly power consumption in June at 114.5 billion units (BUs) was 5.2% higher than the previous month, while in July, supply increased further 8.7% sequentially to 124.4 BUs. Electricity consumption in July was even more than the level recorded in the corresponding month in 2019. Power demand in the first 15 days of August has been more or less at the same levels in the corresponding period last month.

As on June 22, as many as 21 power plants, had fuel stock to last for less than eight days while currently 66 generating stations are running with such critical stock levels. Rising renewable energy capacity has been helping in the slower depletion of coal stocks at the power plants, as solar and wind power plants have supplied 60.1 BU in the April-July period, about 17% higher than the same period last year.

The current level of outstanding dues is equal to the amount CIL has set as its annual capex target for FY22. Under capex, `3,000 crore will be spent on Talcher Fertilizers and about Rs 1,500 crore will be spent on the rail lines that are being constructed to improve coal evacuation. The company is also in want of cash to make up for the steep fuel costs amid record high auto fuel prices. In Q1FY22, CIL lost about Rs 700 crore because of high diesel rates.

CIL’s output had declined 1% annually to 596.2 million tonne in FY21, mainly due to lower demand from power plants in the coronavirus impacted fiscal amid reduced electricity requirement. Consumers procured 573.8 MT of coal from the miner — which produces about 80% of the country’s coal — which was 1.3% lower than FY20. With lower offtake, stock of excavated coal lying at CIL mines has swelled to an all-time high level of 96 MT. Coal companies have to moderate production according to offtake, as coal cannot be stockpiled beyond a certain quantity without the risk of catching fire.

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