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Election-bound states plan for power

 (HT)
(HT)

Summary

Rajasthan and Madhya Pradesh are likely to go for assembly elections shortly. Experts suggest that states will look at procuring power along with more coal to meet the power demand and avoid having to enforce power cuts ahead of the elections.

NEW DELHI : With demand for power soaring to record levels at the start of September, states headed for Assembly elections this year are ramping up efforts to increase coal and power purchases, even at high prices.

Rajasthan Urja Vikas Nugam Ltd (RUVNL), the state-run power trading company of election-bound Rajasthan purchased 1,000 MW of power for 8.25-10 per kwh (unit) for September in short-term tenders, according to data from the DEEP portal. Similarly, for November, December 2023 and January 2024, RUVNL has tied up a total of 2,200 MW fo 6.25-7.2 per unit.

These prices are higher than current prices on the exchanges. The price in the day ahead market of the Indian Energy Exchange stands at 4.9 per unit.

Rajasthan and Madhya Pradesh are likely to go for assembly elections shortly.

Experts suggest that states would look at procuring power along with more coal to meet the power demand and avoid having to enforce power cuts ahead of the elections.

“Historically there have been instances that whenever there are elections, governments may not like to see power cuts. However, in the past few years, the deficit levels have come down," said Vikram Reddy V, vice president and sector head, corporate ratings, ICRA.

He noted that although demand has eased since growing to 16% in August, it is still 10% higher in September compared to the corresponding period last year.

Further, power generating companies including state gencos are also increasing their imports in a bid to meet the shortfall in domestic coal or the lag caused by logistical delays, said people in the know. The Centre also last month mandated domestic coal-based power plants to blend 4% imported coal till March next year.

In January, gencos were asked to blend 6% imported coal till September in order to meet high demand during the summer. This directive to continue blending imported coal till March comes at a time when general elections are expected around April next year.Currently, domestic coal-based thermal power plants have a stock of less than 10 days of coal, showed data from the Grid Controller of India, down from 13 days in March. But with the end of the southwest monsoon rains, hydro power would not be available in a big way, and most of the demand would have to be catered by thermal plants, which has raised further concerns of a coal shortage.

Further, the union ministry of power last month also directed imported coal-based (ICB) power plants to operate at full capacity till the end of October. The original directive on this was issued in February when ICB plants were asked to run at full capacity till 15 June, which was later extended till September.

According to sector experts, coal imports may also rise as global prices of the mineral have eased.

The Indonesian HBA coal price index has declined from over $200 per metric tonne in April 23 to $130 per metric tonne on September 23.

According to the power ministry, despite the increase in domestic coal supply during the first quarter of FY24, it fell short of meeting the requirement. In August, the gap between coal consumption at these domestic coal-based plants and the receipt of domestic coal was about 200,000 tonnes per day and the gap was partly made up with import of coal without which coal stock would have declined to critical levels.

The peak power demand touched fresh highs in August and reached a record of 239.9 GW on 1 September, against the Central Electricity Authority’s (CEA) estimate of 230 GW this year. On 1 September, when the peak power demand neared 240 GW, the peak shortage had shot up to 10.75 GW.

Although the power demand has eased since the first week of September due to rains and easing of temperatures, the peak demand is still elevated and still above the 200 GW mark. On 26 September, it stood at 206.71 GW and the peak shortage was 627 MW. The generation outage stood at 48.062 GW. Generation outage refers to the unoperational power generation capacity.

The rise in power demand this year has come in the backdrop of weak monsoon rains and the El Nino effect. The anticipation of a strengthening El Nino phenomenon may keep the demand elevated in the coming months.

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