Muted coal production no barometer for power sector’s health: power ministry

The slow growth in coal output—1.8% between April and January in 2016-17—does not reflect the 6.2% jump in thermal power generation this year , says ministry


Coal production by the state entity picked up in the last couple of months after three consecutive months of contraction from August to October 2016 from the respective periods a year ago. Photo: AFP
Coal production by the state entity picked up in the last couple of months after three consecutive months of contraction from August to October 2016 from the respective periods a year ago. Photo: AFP

New Delhi: The sluggish growth in coal production in this financial year masks the robust growth in power generation as record-high inventory of coal at power stations at the beginning of this fiscal year (after years of critically low supplies) is feeding electricity generation, according to an analysis by the power ministry.

The slow growth in coal output—1.8% between April and January in 2016-17—does not reflect the 6.2% jump in thermal power generation this year from the year-ago period as plants sought to cut down coal inventory, said a performance analysis of 110 closely-monitored power plants across the country by the power ministry.

As per this analysis reviewed by Mint, coal inventory at plants which was at 39 million tonne last April—sufficient to run them for two months—has come down to 20 million tonne as on 1 January 2017.

Coal consumption by power plants went up 9% in the April-November period of the current fiscal year, while coal production from state-owned Coal India Ltd, which accounts for about 80% of the country’s coal output, grew by a paltry 1.3% in that period, with inventory filling the gap. Coal consumption data by power generation companies after November is not yet available.

Coal production by the state entity picked up in the last couple of months after three consecutive months of contraction from August to October 2016 from the respective periods a year ago. In January, output jumped 5.8%. The company has a stock of about 65 million tones of the fuel at present.

Power generation companies’ faith in the supply situation got strengthened enabling them to cut inventory after the government rolled out a plan to double production to 1 billion tonnes in five years and to rationalise coal logistics.

The 6.2% growth in power generation in the first nine months of this financial year to 738 billion units of electricity compared to the same period a year ago indicates growing appetite for power from distribution companies that are making turnaround efforts under the Ujjwal Discom Assurance Yojana (UDAY), a debt restructure and efficiency improvement scheme launched in November 2015. Accomplishing a turnaround, however, is not an easy task.

Despite achieving village electrification, many states are yet to claim 100% electrification as they still are to ensure last-mile connectivity to all household in villages. States like Uttar Pradesh, Jammu and Kashmir, Chhattisgarh, Goa, Karnataka, Bihar and Manipur have also reported a deficit in meeting their peak power demand. Since UDAY mandates strict vigil on the finances and operations of state-owned distribution firms by the state finance departments concerned, utilities are not in a position to borrow at their will to fund losses.

Sudip Sural, senior director, Crisil Ratings, said one major milestone that will indicate the revival of the power sector among distribution firms is elimination of the gap between their average revenue realized and the cost of power supply by the deadline set in UDAY of 2018-19.

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