Indian power plants on full steam riding crash in global coal prices

If there could be some degree of respite for the common folk during this year’s overheated summer, it might be fewer electricity outages. And they might want to thank China for that.

Electricity generation by Indian power plants fired by imported coal has nearly doubled in the first three weeks of April from a year earlier as global prices of the polluting fuel have declined by about 30%. 

This is primarily because of an oversupply in China, the world’s largest producer, which has pushed down global coal prices, making the nonrenewable energy source more accessible to Indian power plants.

This is timely for India because the country is set to witness its highest ever power demand this year, surpassing last year’s record levels. Estimates by the Central Electricity Authority suggest peak power demand may reach 260 GW by September.

“Coal prices have eased in the past year and power plants in Maharashtra and Gujarat are importing coal amid the falling prices,” said Jabal Patel, proprietor of Giant Asia, a Gujarat-based coal supplier, adding that about 18,000 tonnes of coal is being lifted on a daily basis.

Increased power generation

Thermal or coal-based power plants account for about 55% of the total electricity produced in India. Plants based on imported coal account for only about 8% of India’s thermal power generation, but are crucial particularly in coastal states that are far from domestic coal mines.

Power generating plants that run on domestic coal too are operating at full capacity given adequate coal production in the country. The government had mandated these plants to blend 6% imported coal to ensure electricity supply, but that hasn’t been necessary because of sufficient availability of the fuel at home.

Power generation by imported coal-based power plants increased nearly 90% to 6.51 billion units during 1-23 April, show coal ministry data. In the same period, power generation by power generation companies using domestic coal increased 5.03% to 78.51 billion units.

Between December and February, thermal coal imports into India increased to 50.6 million tonnes from 36.6 million tonnes in the same year-ago period.

Indian power plants that depend on imported coal tend to curtail their operations if the prices are high. The recent fall in coal prices has allowed them to operate at maximum capacity, industry executives said.

Besides, the government has directed such plants to operate at full capacity to meet electricity demand in the country.

The price of Australian G4 grade coal with energy content of 6,300 kilocalories per kilogram (kcal/kg) has declined 31.7% year-on-year to $129.13 per tonne. Similarly, Indonesian G11 grade coal with energy content of 4,200 kcal/kg is 24.3% lower at $54.52 per tonne, as per market estimates.

Thermal coal imports into India increased 14% to 207.4 million tonnes in the 2023-24 financial year, show data from rating agency Icra.

Adequate supplies

Amrit Lal Meena, secretary to the Union ministry of coal, said coal stocks at power plants in India was at 46.88 million tonnes, adequate for about 19 days of operations. This is higher than the 33.70 million tonnes of coal stocks available for power plants in the same year-ago period.

“There would not be any major depletion of coal stock and it would be adequate to meet the rising demand even with the temperatures rising,” Meena told Mint. “Our target is to have at least 40 million tonnes of coal at the plants by 30 June, and we are well on the way to meet that requirement.”

Total coal stock in India currently stands at 154.37 million tonnes, 29.4% higher than the 119 million tonnes available in the corresponding period last year.