Lack of planning by state governments led to coal crisis, says Centre

Discoms should improve recovery, says power secretary

During the peak power demand season of the summer, four states – Uttar Pradesh, Maharashtra, Tamil Nadu, and Rajasthan – defaulted on payments to Coal India (CIL) for their state-owned power units. CIL in turn regulated the coal supply to these states.
 
Delayed monsoons, and the opening up of the economy after the second wave of Covid-19 led to an increase in power demand. As a result, peak power demand touched a record high of 200 Gw in August. By then, however, CIL had reduced coal production during the rainy months.
 
The mismatch snowballed to a crisis that has led to a situation where 90 Gw of thermal power plants have stock of eight days at present.
 
Power generators like NTPC sprang into action by either sourcing imported coal or ramping up coal production from their own mines. The Centre asked imported coal-based units to produce and sell more, and changed the coal dispatch model to balance the supply to all units across the country.
 
A looming power crisis has been averted, claim senior officials, but they fear the lack of payment discipline and planning by states could result in a repeat. “We asked the states and generating companies (gencos) to stock up coal as early as October 2020. Many power plants regulated their coal intake from November 2020 till June 2021, consuming their own stock instead of replenishing it and creating buffer stock. This resulted in stock depletion in these plants,” said a senior CIL executive.
 
Speaking with Business Standard, Alok Kumar, secretary at the ministry of power, echoed the sentiment. “States did not stock up coal in advance and also delayed the payment to CIL. Discoms didn’t pay gencos in time, which delayed their payment to CIL. Discoms should improve their recovery,” he said.
 
Kumar said he even wrote to the four states to regularise their payment so that there was enough coal stock. “For a week, we have decided that coal supply would be paused to units that have enough coal and more dispatch would be made to those with critical stock limits,” Kumar added.

The power secretary also said the ministry had told imported coal-based power units, apart from Mundra, to sell on power exchanges “at their own price risk and within the rights of their power purchase agreement (PPA)”.
 
The ministry in a statement last week said it was in talks to allow the two imported coal units in Mundra – Tata Power UMPP and Adani Mundra – to sell power on exchanges. A statutory order from the ministry was awaited, as officials said the procurer states agreed to Mundra units selling power on the spot market.
 
Coal supply should improve in the next fortnight, claimed officials. But the payment-supply mismatch is here to stay. As of July end, the pending dues of CIL from gencos and states stood at Rs 17,000 crore — a 40 per cent rise from three months earlier. According to government data, about 20 Gw of power units have their coal supply regulated due to delayed payment to CIL.
 
Tamil Nadu, one of highest defaulters to CIL, has average stocks of 10 days at its power plants, down from 15 days earlier. The state, however, blames the Railways. “We are getting only 60-70 per cent of the assured number of rakes. The current shortage is created by the Railways as they are failing to meet the demand,” said a senior state government official.
 
The Railways, however, has rebutted this claim. A senior official said, in the current financial year 253 million tonne (MT) of coal was loaded — 34 per cent more than in the corresponding period last year. As rains have stopped near mines, coal production would increase now, said Union government officials, adding that the Railways would make available more rakes. In middle of this, crucial “bridge fuels” hydro and gas-based units had a role to play. Due to deficit and delayed monsoon, reservoirs of hydro power units were not at optimum capacity. Kumar said gas units were consulted, but their cost was high.
 
“For the gas-based units, the variable cost will be very high as they all will have spot contracts and you have to include the cost of regasification etc. Around Rs 4.50-5 would be the variable cost of the gas units so it’s not a viable option,” said Sabyasachi Majumdar, group head and senior vice-president, ICRA Ratings.
 
He added that increasing pressure from the CPSUs for timely payment also played a role. “There is a need for better forecast planning,” he said.
 
The BJP-ruled central government unveiled a second power distribution reform of Rs 3 trillion earlier this year. The scheme aims to improve the finances and operations of discoms. There have been four reforms or financial restructuring schemes over the last decade for the state-owned discoms, but they have not changed the situation much.