The Union coal ministry said on Tuesday that it has amended the Mineral Concession Rules, 1960, to allow open market sale of up to 50% coal produced from captive mines against additional payment to state governments.
About 63% of the country’s coal-based power capacity have fuel stock at ‘critical level’, or enough to last less than 7 days to be precise, causing the government and coal producers, including state-run Coal India (CIL) and captive producers with freedom to sell in the open market, to take steps on a war footing to avoid serious power outages that could impede the incipient economic recovery.
Coal-fired power stations, which produce over 70% of the electricity consumed in the country. had an average of four days’ fuel stock at September -end, down from 13 days at the start of August. As on October 3, around 132 giga (MW) of power generation capacity had fuel stocks at critical levels.
The Union coal ministry said on Tuesday that it has amended the Mineral Concession Rules, 1960, to allow open market sale of up to 50% coal produced from captive mines against additional payment to state governments, after meeting the requirement of the end-use plant-linked with the respective mines. The move is likely to benefit over 100 captive coal and lignite blocks with over 500 million tonne per annum peak rated capacity.
Power minister RK Singh told a TV channel on Tuesday that, “We are in a position to meet whatever demand there is and the coal dispatches have also increased”. He added that “yesterday (October 4), 268 railway rakes of coal was dispatched, which is an increase of 16 rakes from the previous day”. “Now that the rains have abated, the dispatches will increase more,” the minister added.
The coal supply crunch could force some thermal stations to resort to import of coal, which, given the high global prices of the fuel amid a similar supply squeeze in China too, could make power expensive for businesses and industries.
Average coal stocks at power plants had dwindled to four days as at the and of September, which was the lowest in a decade.
Analysts at DAM Capital have attributed the low stock levels to “higher coal burn in August and September, power plants not stocking enough and low alternative supply of coal”.
CIL recently said it has augmented supply to 1.4 million tonne (MT) of the fuel per day. The company aims to ramp up coal supply to power plants to 1.6 MT per day by October-end.
On August 28, there was a massive power supply shortage of 77.7 million units (MUs) across the country when there was around 90,000 MW of power plants with less than seven-days of coal stock.
Though the coal stock situation has worsened since then, supply shortage on October 4 was 36.2 MU, mainly because of power demand falling with decreasing temperature. Peak power demand on August 28 was 179 GW, while the same on October 4 was 168 GW.
The government has already announced its decision to regulate supply to power plants with low utilisation levels having coal stock of more than 10 days, and the fuel will instead be supplied to needy generating stations with low stock but running at high plant load factor.
Bloomberg reported: “Operators of coal-fired plants are facing a dilemma — pay large premiums at domestic auctions to secure any available local supply or wade into a seaborne coal market where prices have soared to the highest on record. Already, the nation’s government is drawing up guidelines in case it needs to bring idle power stations back into action.”
“Until supplies stabilise completely, we are likely to see power outages in some pockets, while customers elsewhere may be asked to pay more for power,” the agency quoted Pranav Master, director for infrastructure advisory at credit ratings firm Crisil, as saying.
Coal stocks were at a comfortable level of 24 MT at the end of July. “Had the power utilities maintained the Central Electricity Authority prescribed normative stock of 22 days the low coal stock situation could have been averted,” CIL recently said. CIL supplied a record volume of 226 MT of coal to power utilities during April-September, 2021 (till 15 September).
Crisil recently said that coal inventory at thermal plants will improve only gradually by next March, and for the ongoing fiscal, it will hover around 10 days compared with the two-year average of around 18 days.