Govt mandates power units to import coal for blending

TAKING STOCK

12 Power plants, with total capacity of 17 Gw, using 100% imported coal

13 Plants, with total capacity of 72 Gw, blending imported coal with domestic supply Note: Power plants include those of Centre, states as well as private Sources: Central Electricity Authority, National Power Portal

The Centre has asked thermal power generators to import coal for at least 10 per cent blending, citing shortage of domestic coal supply. This is a sharp reversal of its earlier directive of using domestic coal. At the same time, it alleged that “several states” were selling unallocated power from central generating stations on power exchanges “at a high price” and would be penalised. The Union power ministry's warning came without the ministry spokesperson disclosing which states they were. The mandate to use imported coal for blending came two days after the coal and power ministers denied any shortage of domestic coal.

"Thermal power plants based on domestic coal will use imported coal of up to 10 per cent for blending with domestic coal, wherever technically feasible, to meet the increased power demand in the country. Power generation companies (gencos) shall expedite the process of importing coal for blending to meet the requirement,” stated the notification on Tuesday.

The power ministry said the revival of the economy had led to an increase in demand and consumption of electricity.

“During the Augustseptember period, the share of coal-based generation increased to 66 per cent, from 62 per cent in 2019. As a consultant, total coal consumption during the same period increased 18 per cent over the corresponding period in 2019. However, supply from Coal India is not commensurate with the requirement," said a notice from the fuel management division of the Central Electricity Authority.

It further said the coal stock at power plants was fast depleting and currently stood at 7.3 million tonnes (mt).

When the crisis started in August with a coal supply shortfall, the Union power ministry earlier urged gencos to "consider import of coal".

As part of the Aatmanirbhar Bharat initiative, the government decided to reduce the import of coal. Union Minister for Coal Pralhad Joshi said India would have zero coal imports by 2023-24, according to a media release by the Press Information Bureau in February 2020.

In a November 2020 interview to Business Standard, Joshi said the government has decided not to import coal and that states and the Centre should work together towards it. "Despite having large reserves, we spent some ~2.4 trillion in 2018-19 on importing coal. Coal India does pay for land and rehabilitation. It is building houses on wastelands, giving employment, and paying compensation for land taken. No state or central government, or their agencies, offer these many jobs. The question is whether we want to go for imports or domestically produce it by building a whole ecosystem," he had said.

The Centre in 2017-18 had tried for zero coal imports, but it led to a shortage, compelling thermal units to resume the import of coal.

Coal stocks at thermal units fell to five days in September 2018, following complaints from several states over supply deficit. But in less than three years, a chain of events since August led to diminishing coal stock levels at thermal units. Currently, 16.8 gigawatt (Gw) of power generation capacity has zero days of coal stock and 25 Gw has less than three days of coal.

With coal supply and electricity shortage looming, several power distribution companies are panic buying on the power spot market, taking spot prices to record highs of ~20 per unit (kilowatt-hour, or kwh) - the ceiling price in the day-ahead market.

The Union Ministry of Power has, however, blamed states for this. "It has been observed that some states are not supplying power to consumers and imposing loadshedding in some areas. On the other hand, they are selling power in the power exchange at a high price," said a statement from the ministry.

The statement is in regard to the 15 per cent power from central generating stations kept under 'unallocated power'. This power is given by the central government on a need-basis to states.

The average market clearing price on Tuesday on the Indian Energy Exchange was ~15.85 per kwh. The maximum price was ~20 per kwh.