Anticipating another coal crisis, power ministry asks all gencos to import 6% of their coal requirement

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The power ministry has anticipated a coal shortfall of 24 MT at thermal power plants for the first six months of the financial year 2023-24 and accordingly, has asked all generation companies (gencos) to use imported coal to the extent of 6 percent of their requirement.

The directive was passed through a letter issued by the ministry on January 9 which stated that due to the recent surge in demand and consumption of electricity, the share of coal-based generation has increased. It added that although the supply of coal from all sources has increased, it is not commensurate with the requirements of thermal power plants (TPPs).

To be sure, this directive is different from the one where the ministry last year on May 5, 2022 had asked imported coal-based power plants to mandatorily open and generate electricity to their full capacity. However, now, the power ministry has made no further extension to the May 2022 order which was imposed invoking section 11 of the Electricity Act.

“In the light of the above scenario where energy demand is increasing and increase in supply of coal is not commensurate with the domestic coal requirement, the need has arisen to continue the use imported coal for blending purpose. MoP, after consultation with Central Electricity Authority (CEA), ministry of coal (MoC), ministry of railways (MoR) and Association of Power Producers (APP) has decided to direct all gencos to import coal for blending at 6 percent (by weight) for the remaining period of this current FY and H1 of the next FY (up to September, 2023),” read the letter seen by Moneycontrol.

The ministry further said the domestic coal supply of those Gencos who do not follow the directive of blending 6 percent imported coal shall be restricted to pro-rata basis.

According to Grid India (POSOCO), the energy demand of the country has increased sharply and it is expected to remain at an increased level during H1 of 2023-2024. CEA has accordingly revised the target for coal requirement for Q4 of current FY and H1 of the next FY. In line with his, MoC has committed to supply coal to meet the revised target of 197.7 MT. However, it is subject to the availability of rakes and other logistic issues.

“As per the past trend, the likely supply of domestic coal during the H1, FY 2023-24 would be around 392 MT. Thus, around 24 MT would be the anticipated shortfall during the H1 of FY 24. It is noted that the shortfall between the daily coal consumption and the daily arrival of domestic coal is ranging from 3 Lakh Tones per day to 1 Lakh Tonnes per day. This shortfall is made up by blending with imported coal. It is assessed that coal stock position without blending of imported coal in domestic coal based plants will progressively decline to zero which will severely impact power supply position in the country,” the ministry said in the letter.

It said the import of coal for blending purposes needs to be done in a streamlined manner in order to avoid clogging of logistics. During Q1 and Q2 of FY23, imported coal stocks at ports piled up due to logistic constraints.

In order to ease the logistic pressure on railways, the power ministry has planned to transport available coal from Mahanadi Coalfields Limited (MCL) region through RS mode to TPPs located in northern and western parts of the country. Accordingly, directions have been issued to source 10 to 15 percnt of their requirement through RS mode to the states of Gujarat, Rajasthan, Maharashtra and Punjab as well as NTPC. “Efforts have also been made to address the constraints in transportation of coal (RCR, Road, ARR) through all modes. Despite the above-mentioned efforts, it has been noted that the infrastructure-related logistic constraints of Railways will take some time to get fully addressed,” it said.

On May 5 last year, when the country’s power demand had suddenly soared and thermal power plants had inadequate domestic coal to run fully, the power ministry invoked an emergency clause of the Electricity Act (section 11) and asked all thermal power plants running on imported coal to open and generate to their full capacity. This order was initially supposed to be valid till October 31, 2022. But, it was later extended to December 31, 2022.