
There's a crippling coal shortage, but these private power producers aren't worried

Summary
- Power demand will remain high as the upcoming festive season boosts commercial demand
- JSW Energy, Tata Power and Adani Power may not be hit as they import most of their coal
MUMBAI : India’s coal stocks have hit low levels, sending alarm bells ringing in the power sector. However, private players such as JSW Energy Ltd, Tata Power Co. Ltd, and Adani Power Ltd may not be impacted as they import most of their coal from captive mines abroad, said analysts.
Coal stockpiles at Indian coal-fired power plants have nosedived. Till last week, 16 of India’s 135 coal-fired power plants had zero coal stocks, according to the Central Electricity Authority (CEA).
The surge in power demand has seen a robust recovery after the second wave of covid-19 eased. As of August this fiscal, it was up 16% year-on-year (y-o-y) and 3% over the corresponding period of fiscal 2020, or the pre-pandemic level.
Peak demand also spurted sharply, especially over June-August, led by staggered rainfall, peaking temperatures, and the recovering economy. In July, peak demand crossed a record 200 gigawatts (GW). Peak demand is an important metric, along with rising base demand, as it is instantaneous and requires coal plants to quickly ramp up over a short period.
“To meet peak demand, thermal power plants need adequate coal stocks to quickly ramp up utilization levels," said Crisil in a report.
According to Prashant Jain, chief executive officer, JSW Energy, this year from April to September we saw a 13% growth in electricity demand. India has around 600 million tonnes of coal production and imports around 200 million tonnes of thermal coal.
“Suddenly, thermal coal prices have gone up and are at $200 per tonne in the international market. So coal is being imported less and domestic coal is being relied on. So there is a shortage," Jain told a television news channel. In the last decade, there has been no investment in the power sector but demand has been going up by 5% every year, he said. So now this has begun pinching us.
Stocks at power plants reached critical levels amid the surge in demand to about 17 million tonnes as of August 2021, which would be sufficient for just seven days of power generation.
To tackle the situation, a core management team was set up in August to ensure supply of coal to plants with stocks at critical levels. This was done by diverting coal from non-power end-use sectors to fuel increased demand for power. “This time of the year typically sees a seasonal dip as rain affects coal production. Historically, average production in the second quarter of the fiscal has remained 20-25% lower than in the other three quarters," Crisil said.
Domestic coal production and dispatches from Coal India Ltd (CIL) and Singareni Collieries Co. Ltd (SCCL) have been high, with coal dispatches over April-August increasing 27% y-o-y and by 5% compared with fiscal 2020 and import has been subdued as international prices surged.
The price of 4,200 kcal per kg coal from Indonesia rose 125.34% from $44.4 per metric tonne (mt) on 1 January to a record $100.05 per metric tonne on 29 September, Platts data showed.
The price of 3,800 kcal per kg coal from Indonesia rose 127.27% from $33 per mt on 4 January to $75 per mt on 29 September.
“India’s total coal stock stood at 37.41 million mt at the start of 2021, according to CEA. This has dropped to 8.317 million mt as of September 27, sufficient only for five days of coal burn," said S&P Global Platts Analytics in a note.
In April-July, non-coking coal imports by the power segment were at the same level as in FY21 and down 37% compared with FY20. With recovery in industrial activity, coal demand from non-power segments has also risen sharply. Coal offtake for non-power segments, which accounts for 30% of overall non-coking coal consumption, on average, rose 16% during April-August in FY22. However, as coal supply was directed towards the power sector on a priority, the situation turned grim for non-power sector users, leaving players with stocks for a mere four-five days.
Power demand is expected to remain high, with increasing industrial productivity, and the forthcoming festive season that boosts commercial demand, followed by the last quarter of the fiscal when the temperature starts peaking. However, robust growth in power consumption in the first half of this fiscal will taper because of base effect as the second half of last fiscal had seen power demand grow by a strong 7.5% on-year.
The spot power tariffs on day ahead market of the Indian Energy Exchange witnessed a sharp recovery to ₹3.7 per unit in the first six months of FY22 from about ₹2.8 per unit in FY21, led by better-than-expected recovery in electricity demand and coal supply constraints witnessed in August and September 2021.