Sunday, October 24, 2021

Increase in demand, rise in price of imported coal disrupts supply

Ministry of Power constituted a Core Management Team in August this year comprising of representatives from Power Ministry, Central Electricity Authority, Power System Operation Corporation Limited, Railways and Coal India Limited to ensure daily monitoringAn inter-Ministerial sub-Group led by Ministry of Coal has been monitoring the coal stock situation in the country twice a week. Coal Ministry sources said, in order to manage the coal stock and ensure equitable distribution of coal, Ministry of Power constituted a Core Management Team in August this year comprising of representatives from Power Ministry, Central Electricity Authority, Power System Operation Corporation Limited, Railways and Coal India Limited to ensure daily monitoring. The Core Management Team is closely monitoring and managing the coal stocks on daily basis and ensuring follow up actions with Coal India Limited, Railways to improve the coal supply to power plants.

The sources said, the reasons for the depletion of coal stocks at the power plant end are unprecedented increase in demand of electricity due to revival of economy, heavy rains in coal mine areas last month which adversely affected the coal production as well as dispatch of coal from mines, increase in prices of imported coal to unprecedented high level leading to substantial reduction in power generation from imported coal based power plants leading to more dependence on domestic coal and non-building of adequate coal stocks before the onset of Monsoon.

There are also legacy issues of heavy dues of coal companies from certain states like Maharashtra, Rajasthan, Tamil Nadu, Uttar Pradesh, Rajasthan and Madhya Pradesh.

A surge in revival of economy after second wave of Covid, led to unprecedented increase in demand and consumption of electricity. The daily consumption of electricity has crossed beyond 4 Billion units per day and 65 per cent to 70 per cent demand is being met by coal fired power generation only, thereby increasing dependence on coal.

The unprecedented increase in coal based power coupled with supply shortage during Monsoon and less stock build up in April to June 2021 has led to the depletion of coal stocks in power plants which was 13 days as on 1st August this year and now 4 days as on 1st October 2021. Out of 135 power plants monitored on daily basis, 72 plants have coal stocks of less than 3 days, 50 plants have stocks from 4 to 10 days and 13 plants have stock of more than 10 days.

Ministry of Power has advised Central Electricity Authority to specify the mandatory coal stocks to be maintained by power plants both at pit-head and non-pit heads. There would be a provision of disincentives for those plants who do not maintain their mandatory coal stocks and they would be kept in lower order of priority for coal dispatch. Those Gencos who do not clear dues of coal companies, may be kept at the lowest order of priority for coal dispatch. In fact grading of Gencos would be carried out based on coal stocks maintained by them as well as regular payments to coal companies. Those Gencos higher in the grading would be given priority in coal allocation and dispatch.

In the last week of August 2021, plant outages on account of coal shortage were reported for a capacity of about 13 thousand Mega Watt which led to increase in power exchange prices up 20 rupees per kilowatt hour. After intervention of Core Management Team, now the outage has come down to 6 thousand 960 Mega Watt and power exchange prices are at about 7 rupees per kilowatt hour.

Power consumption for the period August-September has progressively increased from 106.6 Billion Units per month in 2019 normal non covid year to 124.2 Billion Units per month this year. During this period the share of coal-based generation has also increased from 61.91 per cent in 2019 to 66.35 per cent in 2021. As a consequence, total coal consumption in the month of August-September, 2021 has increased by 18 per cent in comparison to corresponding period in 2019.

As coal consumption by thermal power plants is likely to exceed 700 Million Tonnes this Financial Year 2021-22, a comprehensive strategy has been prepared by Ministries of Coal, Power and Railways to remove logistic bottlenecks in order to sustain high demand and consumption of coal by power plants.

Moreover, in consultation with Ministry of Coal, coal supply would not be restricted to the annual contracted quantity of power plants but plants would be given coal as per their actual requirements. Those plants coming higher in Merit Order Dispatch as per Security Constrained Economic Dispatch would get more coal.

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