With the mercury rising this month, short-term power prices have seen an increase of 20-25 per cent, with the highest price at which power was traded touching Rs 5 per unit.
The average for power trading was Rs 3.5-4 per unit. “Due to mismatch in demand and supply, the prices are expected to increase further but it will not reach too high a level,” Rajesh Mendiratta, the India Energy Exchange’s senior vice-president for business development, told Business Standard.
There is a shortage of about 9,000 Mw in overall demand from the grid, at a little over 100,000 Mw. The country's biggest power exchange, IEX received purchase bids for 77,000 Mw and of 72,000 Mw for sale today. Traded volumes on the exchange have risen to 45,000-50,000 Mw/hour this month on a daily basis from 35,000-40,000 Mw/hour in April, he said.
Last year, in the same period, the average rates were 2.9 per unit. (There was a particular problem in October, when the coal shortage crisis sent short-term power prices and volumes haywire at the exchanges, with average rates surging to Rs 7-7.5 per unit, from Rs 2.5-3.5 and traded volume fell to 35,000 Mw/hr on a daily basis from 100,000 Mw/hr).
Jindal Steel and Power, Lanco Infratech and JSW Energy are among the largest traders in merchant power. According to an expert, merchant power rates will remain on the higher side till the issues in demand and supply as well as coal shortage are addressed. Also, every year in the summer, the prices move upwards.
The power industry has been facing inadequate coal supply for some time, as the production of government-owned Coal India, the near-monopoly producer, is unable to match their rising need. Demand for coal in India has grown at an annual rate exceeding 8.4 per cent over the past five years. That of annual supply has been nor more than 5.4 per cent during the period. For 2011-12, while India’s coal demand is estimated at 696 million tonnes, 554 mt is likely to be available, leaving a gap of 142 mt to be met through import.
Data from the Central Electricity Authority also shows about 30 plants are at a critical level, with coal stock of less than seven days. This might aggravate the power supply problem. There are 95 thermal power plants with a total capacity of 91,487 Mw. Inadequate coal allocation and less import are the major factors for the decreasing level of stocks at the power plants. Last year, issues such as heavy rain disrupting coal supply, a workers’ strike at Coal India and the Telangana agitation in the south had snapped fuel supply at many power stations.
After a directive from the Prime Minister’s Office and later a Presidential directive, Coal India signed some fuels supply agreements (FSAs) for commitment of at least 80 per cent supply. However, some power companies have refused to sign the FSA because of various clauses they’ve objected to.