Coal situation: from problem of shortage to problem of plenty

Four states ask Coal India to curtail supplies; say excess stocks leading to fires

While the government was busy thrashing out ways to ramp up coal output for industries, the coal situation itself seems to have turned over from a problem of scarcity to a problem of plenty.

In a surprising development, at least four states, including West Bengal, Gujarat, Rajasthan and Haryana, have asked Coal India Ltd (CIL) to curtail supplies to its power plants complaining excess fuel stocks are causing frequent fires.

The development comes at the back of an 11% jump in CIL’s supplies to power utilities last financial year and points at the imminent surge in coal availability for the sector.

While the issue has threatened safety of power assets in these states, it comes as a breather for coal consumers who have been grappling with reduced fuel supplies pulling down efficiency of power stations and putting huge investments at risk.

“West Bengal, Gujarat, Rajasthan and Haryana have asked us to reduce supplies saying stocks have exceeded normal levels. This has been made possible by a 32% jump in supplies to power sector we managed in 2012-13. While West Bengal has formally written to us, other states have not,” CIL Chairman S Narsing Rao told Business Standard. Coal consuming companies refuse to formalize requests for curtailing supplies for fear they would invite penalties under Fuel Supply Agreement (FSA).

Business Standard analyzed the latest Central Electricity Authority (CEA) data on coal stocks to counter-check Rao’s claim. The data corroborated the surprising trend. While as per norm, desirable coal stocks are those that are sufficient to last for 15 days, coal stocks at the 14 power stations in West Bengal have touched a record high of 39 days.

Three stations in Rajasthan – Kota, Suratgarh and Chhabra – have coal stocks of upto 20 days. Stocks at the five stations in Gujarat – Gandhinagar, Ukai, Sikka, Sabarmati and Wanakbori – have swelled upto 27 days. In Haryana, the situation is even better with stocks having swelled to an unbelievable 31 days.

This, however, does not mean that coal shortage for the power sector has been completely eliminated. What has happened is a sharp reduction in the number of power stations with a critical coal stocks level - from almost half of all the country's power plants to less than a fourth. “I assure meeting 100% demand from all state utilities which have valid PPAs with discoms this year. We will supply additional 32 MT coal to power utilities this fiscal too. Currently, only 15 stations have coal stock shortage.

This is due to logistics issues,” Rao said. At the national level, 23 of the total 93 power stations (24%) are critical according to CEA. This is in stark contrast to the situation last September when 50% of the 93 stations had turned critical raising a furore over coal crunch and leading to huge load-shedding across the country. Stocks of less than seven days are considered critical and less than 4 days are considered supercritical.

“West Bengal Power Development Corp (WBPDCL) has been burdened with excess coal for the last six months due to more than FSA dispatches from CIL subsidiaries Eastern Coalfields (ECL) and Bharat Coking Coalfields (BCCL). Our coal stocks have reached dangerously high levels,” WBPDCL Chairman and Managing Director Barun Kumar Ray said in a 4 April letter to CIL Chairman S Narsing Rao asking for his immediate intervention to help cut down supplies.

The state government company has a generation capacity of 3,860 Megawatt (Mw). It has a monthly program of buying 345,000 tonne of coal, sourcing 3 rakes every day, from CIL under its Fuel Supply Agreement (FSA) for its five power projects including Kolaghat, Bakreshwar, Sagardighi, Bandel and Santaldih thermal power stations. However, the coal surge in the past few months has pushed up loading to 5.5 rakes per day leading to a buildup of a massive 9,20,000 tonne of stocks at the five power plants.      

“Excess receipt of coal from CIL has resulted in an unprecedented high level of coal stocks and spontaneous fires have already started at Kolaghat, Bakreshwart, Sagardighi and Bandel power stations. I would request yopu to direct CIL subsidiaries to adhere to the (curtailed) plan till we consume a fair share of the stock and before the coal loses its calorific value,” Ray told CIL Chairman.  

A senior official from Rajasthan’s energy department confirmed the new trend. “It is a fact that our coal stocks, which used to remain at margins earlier, have increased significantly, particularly in the past three months,” he told Business Standard, asking not to be quoted. Asked what could be the reason for this shift, he said, “CIL has increased supplies.

Their own production has increased.” While Coal India might rejoice over the new trend of increased supplies leading to unprecedented jump in stocks, logistical constraints, particularly, railway rakes availability, will have to be eased if the trend has to be sustained.