Coal India prepares for the great Indian summer

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Coal India Ltd (CIL), the country’s largest miner and supplier of coal, is firing on all cylinders in anticipation of a summer hotter than the last. It is scaling up production, holding additional coal stocks at its pitheads and has issued directives to power producers to hold higher inventory at their end, said a company official.

India touched an all-time-high peak power demand of 216 gigawatts (GW) last April. The power ministry expects this to touch a new high of 229 GW come April, a rise of 6 percent.

The surge in power demand last year left many Indian states without electricity for hours due to a shortage of coal needed to fire up power stations to meet the additional needs. A host of factors tripped the coal supply, including lower production, rake unavailability to move the fuel and ballooning payables of state-run power generation and distribution companies.

“CIL aims to keep up the pace of supplies backed by higher production in Q1FY24,” said a senior official. By its own planned schedule, CIL expects annual demand from the power sector to exceed 585 million tonnes (MT) by FY23-end, up from the projected 565 MT. This is expected to rise further to 610 MT for the full FY24.

In the financial year till February 2023, CIL supplied 534 MT of coal to the power sector, an increase of 9.4 percent year-on-year.

“Coal demand would be higher than the 153 MT that CIL supplied to the power sector during Q1FY23,” the official said, adding that it is difficult to predict demand with higher accuracy.

CIL plans to operate at full steam to scale up production in the June 2023 quarter, during peak summer, aiming for a 6 percent increase in its supplies to the power sector in the quarter over the same period last year. “The commissioning of new infrastructure projects has given confidence for ramping up coal supplies to the power sector,” the official said.

The official said CIL is in the process of building additional stock of 68 MT at its mines by the end of March, adding, “Coal India is in constant touch with Indian Railways for increased rake availability to meet higher demand.”

CIL has also written to power generation companies (gencos) to build up coal inventory ahead of the peak demand season.  As of March 1, power stations in India (those with a linkage with CIL) had a total coal stock of 29.59 MT, of which 1.63 MT was imported coal. This translates to 14 days’ coal stock inventory.

The CIL official admitted the increase in receivables from state-run power companies is a cause of concern, pointing out that payables have increased since the start of FY23 up to now. The coal sales dues outstanding as on March 31, 2022, was Rs 13,792.21 crore.

In May 2022, the power ministry introduced a scheme to help state distribution companies (discoms) clear dues worth more than Rs 1.1 lakh crore. The scheme was proposed after pending payments emerged as a critical issue during last summer’s power shortage. The ministry proposed a scheme to allow discoms flexibility in paying pending dues to gencos by staggering payment in up to 48 installments.

State discoms pay for power procured from gencos, who in turn pay CIL for the coal purchased. The CIL official said its subsidiaries are “vigorously following up with different generation companies to bring down the same (payments due)”. He added there is no risk on the receivables as the entities are government-owned.”