Coal reserves down at power plants despite CIL raising output

Coal India accounts for a little over 80% of thermal coal sales in the country

Despite near-monopolist Coal India (CIL) increasing its production and dispatches to thermal power units, fuel stocks with the electricity producers have worsened.

Coal sales to power plants increased 17 per cent to 32 million tonnes (mt) during September. However, average stock with power plants decreased from eight mt during early September to six mt at month-end. As of last Thursday, this had further fallen to five days.

Coal India accounts for a little over 80 per cent of thermal coal sales in the country. Last month, it raised production by 10 per cent to 38.8 mt. And, to push supply to power plants with long-term fuel supply agreements, it reduced the quantity offered in e-auctions to 30.5 mt, from 40.7 mt offered last year in September, although it meant a hit on profit. “We have a national duty to first address the concerns of power plants facing coal shortage,” a senior company official said, adding that production had over-achieved the target at 38.77 mt in September. 

It did this and also ensured more railway rakes for supply to power plants. Even so, critical and super-critical supply situations numbered by September-end and is now 27. Last year, only three were in a similar category. A thermal plant is termed critical when it’s coal stock depletes to suffice for a maximum of a week. Super-critical is when there's only four days of stock.

Coal India says average rail rake loading from the beginning of this month grew 22 per cent to 197 a day. In August, this was 173 a day. The coal ministry, in consultation with the power and railways ministries, had increased rake availability to 250 a day, of which 225 are for power plants. 

In addition, every day, around 25 rakes are being moved to the power sector through private coal washeries and goods sheds. The company says it also encouraged pithead power plants to transport coal via trucks as much as they wished.

Earlier this month, company officials said the situation would “normalise to an extent” by mid-October. This hasn’t happened.

Rupesh Sankhe, research analyst with Reliance Securities, says prolonged rain and resultant flooding in key mining areas resulted in Coal India being unable to increase dispatches. “The prime consideration for Coal India now is to increase production to meet the 600 mt (annual) target and it is likely the company will increase production and dispatch. The situation might take another three-four months to normalise,” he said.

Stress on thermal power generation rose suddenly in August, after hydro and nuclear power plants fell severely short of the production target. Some easing was expected in September but hydro generators fell short of the 17,022 Gwh target by 17.4 per cent and nuclear plants of their 3,548 Gwh target by 24.6 per cent.