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NEW DELHI : A tenth of India’s coal-fuelled power projects is still vulnerable to outage despite temporary easing of electricity demand in the country, Crisil Ratings said in a statement on Wednesday.

This also comes against the backdrop of coal supplies to India’s power plants being increased to help fuel stocks reach 10 million tonnes (mt) by Deepawali. The depleted coal stocks at power plants have been fuelling concerns about a possible electricity shortage, as coal-powered projects account for more than half of India’s power generation capacity.

“About 10% of the 209 GW (20 GW) capacity of coal-based thermal power generation companies (gencos) in India remains vulnerable to outage amid surging demand for coal. Despite the recent dip in demand (10% over 16 and 17 October) due to heavy rains, shortage of coal persists with inventory at five days for these power plants," the statement added.

With power plants burning 1.85 mt-1.87 mt of coal every day to generate electricity, the playbook is to stock 300,000 tonnes per day, resulting in an addition of 3 mt fossil fuel stock over 10 days. Also, with lower electricity demand expected in November, the plan is to build up an additional stock of about 6 mt next month, taking the total fuel stock to 16 mt by the end of November.

“Over half these capacities do not have fuel supply agreements (FSAs), which increases their reliance on coal, either through imports, or through e-auction where prices remain elevated. The scarcity and higher prices of coal may force these capacities to shut down for a few days as their operating cost could outweigh revenue, a Crisil analysis indicates," the statement said.

“To be sure, coal shortages have occurred in the past as well due to monsoon, the lack of evacuation infrastructure, and rake unavailability. These have been partly addressed through higher imports, rationalization of mines, ramp-up of production, creation and improvement of evacuation infrastructure, and liberalization of commercial mining norms. In fiscal 2020, India met ~89% of coal required for thermal generation from domestic sources and balance from imports," the statement added.

India’s 135 coal-fuelled power projects totalling 165.066 GW had five days of stock, as on 25 October, according to the Central Electricity Authority (CEA). Of these, 119 coal projects totalling 129.86 GW had four days of stock and 16 plants located near coal mines totalling 35.2 GW capacity have six days of fuel stock.

“Although domestic coal supply in the second quarter this fiscal is up 16% compared with the corresponding pre-pandemic period of fiscal 2020, part of it is to substitute non-coking coal imports, which have fallen more than 20%, resulting in overall coal supply growing at around 8% and, consequently, coal stock at the plants depleting. Further, domestic supplies have been erratic due to seasonal rains impacting mining," the statement said.

India’s daily electricity consumption has crossed 4 billion units , resulting in a 18% spike in coal consumption during August-September 2021 compared with the corresponding period in 2019. Fuel stocks at India’s power plants had depleted to 7.3 mt on 7 and 8 October. In 2018-19, the fuel stocks had also fallen to 10.1 mt at power projects. The daily coal offtake from CIL mines is expected to be ramped up as there more workers are available at the coal fields after Durga Puja.

“Meanwhile, domestic e-auction premiums (over the notified price of auctions conducted by Coal India Ltd) have spiralled due to scarcity of coal to over 130% this September, from 80% in September 2019. Even global coal prices are 160% higher compared with September 2019 due to growing energy requirement across the globe, constraints in production, and high natural gas prices skewing the energy mix," the statement said.

“We expect high global coal prices to make imports dear and domestic e-auction premiums to remain elevated over the next few months, till supplies stabilize. In this milieu, 20 GW private capacities (out of 209 GW coal-based capacities) will be the most vulnerable as these depend heavily on the open market or imports for coal, and most have committed tariffs for the power sold to utilities," Ankit Hakhu, director, Crisil Ratings said in the statement.

The coal shortage has coincided this year with a spike in electricity demand, growth in number of electricity consumers, and inadequate stocking up by power projects before the monsoon. Also, heavy rains in September impacted coal production and dispatch and non-payments of coal dues also contributed towards inadequate supply.

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