PowerMin allows utilities to import 10% coal to ease supply issues

India’s coal fired power plants are facing severe shortage, with an average of just 4 days of inventory against a recommended level of 15-30 days, due to a sharp uptick in power demand and supply side issues caused by monsoon rains.

Low stocks have contributed to power shortages across a number of states including Punjab, Rajasthan and Bihar that are facing power cuts due to inadequate supplies. (File)

Written by: Karunjit Singh

4 min readNew DelhiOct 13, 2021 08:06 AM IST First published on: Oct 13, 2021 at 03:17 AM IST

The power Ministry on Tuesday allowed power producers using domestic coal to import up to 10 per cent of their coal requirement to boost low stocks, sources said. The move could bolster coal inventory at thermal power plants within a week, they added.

India’s coal fired power plants are facing severe shortage, with an average of just 4 days of inventory against a recommended level of 15-30 days, due to a sharp uptick in power demand and supply side issues caused by monsoon rains.

“We have allowed that they (power generators) use imported coal for blending upto 10 per cent,” a government official said, noting that despite elevated international coal prices, this level of blending would only lead to a 20-22 paise per unit (kilowatt-hour) rise in the price of power. The official noted that power generation companies could sell power on exchanges or agree to higher rates with buyers under power purchase agreements (PPAs) to pass on the cost to distribution companies (discoms) that are currently trying to meet any shortfall in power supply by buying power on exchanges. In 2020, the Centre had advised generating companies to cut coal imports. Global coal prices are hitting record highs due to a coal shortage in China.

Read | To fix coal crunch, captive mines’ 50% output get sale nod

Purchase bids on the Day Ahead Market (DAM) on the India Energy Exchange (IEX) on October 12 were for 430,778 MWh (megawatt hour) up from 174,373 MWh a month ago. Purchase bids far outstripped supply leading to the average market clearing price Rs 15.85 per unit up from Rs 2.35 per unit a month ago.

“Normally it takes 20-25 days (to get imported coal), but if there are some ships on the move and generators can contact them and get it earlier also, potentially in seven days,” the official said, noting that the sharp uptick in power demand was expected to cool off in the second half of the month, easing the pressure on coal stocks.

Also Read | Coal shortage beyond usual, situation touch and go: Power Minister RK Singh

Separately, the Centre said on Tuesday that it had observed that some states were imposing load shedding in some areas and selling power on exchanges at higher prices. Referencing the 15 per cent generation capacity of central generating stations that is left as “unallocated power,” it said that states found selling power on exchanges or not scheduling unallocated power may have their unallocated power “temporarily reduced or withdrawn and reallocated to other states.”

A number of states, including Delhi, have raised the issue of potential blackouts as a result of low coal inventory at thermal power plants. The Central government, however, said on Tuesday that there had been no power outages in Delhi due to power shortage, adding that NTPC and Damodar Valley Corporation (DVC) had been directed to supply the declared capacity under PPAs with Delhi to ensure that discoms in the Capital get adequate supply.

In a tweet, NTPC noted that Delhi discoms scheduled only 70 per cent of the power made available by NTPC between October 1 and October 11. Discoms can requisition less than the normative capacity available to them under legacy PPAs, favouring purchases from alternative sources which may be more economical.