Coal India misses FY22 output target even as soaring temperature drives up demand from power generators

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Coal India Ltd (CIL) produced 622.6 MTs of coal in 2021-22, missing its target for the year and aggravating concerns over coal shortage in power generation units amid increasing demand as temperature soars.

CIL scaled up its production in FY22 to an all-time high but it still missed the target of 670 MT set for the year, due to disruptions related to COVID and heavy rains in the first half of the fiscal.

The company said in a statement on April 1, that it will scale up its output and offtake targets to 700 million tonnes (MT) for 2022-23, but the industry believes they may fall short of the increase in demand in the immediate term.

State-run CIL accounts for over 80 percent of the domestic output of coal.

CIL’s total off-take in 2021-22 was 662 MTs, up 15.3 percent on year. The fiscal 2021-22 was challenging for the company as the nation faced a serious coal shortage that tripled the power sector.

“After a shrinkage in the last two years, CIL came back strongly with a 26.4 MT production increase in FY22. Compared to 596.2 MTs of FY’21, the growth is 4.4 percent,” CIL said in a statement.

But the increase in production may not be enough to address the immediate increase in demand due to soaring summer temperature and high industrial activities. At least 60 power generation units were operating at less than 25% of the mandated stockpile that they have to maintain as of March 30, according to data from the National Power Portal.

Earlier this week, Maharashtra Energy Minister Nitin Raut had said that the state was not receiving the coal supply it has sought to meet the rising demand due to the heatwave.

Punjab, which also sought higher coal supply as erratic supply has disrupted generation at its power units, was left wanting more as the central power ministry reportedly denied the request. The Ministry of Power has informed Punjab that it would not be able to allocate more coal to the state, and the supply would be proportionate to the stock received from Coal India Limited and Singareni Collieries Company Limited.

As concerns heightened over coal supply shortage amidst increasing demand for electricity, the Ministry of Power on March 26 released a circular stating domestic coal supply will be made proportional to the coal received from CIL or Singareni Collieries Company Limited (SCCL) for all the power generating companies, and more coal over and above the proportionate share will not be provided.

Power producers may have to take a tough call between power outages and sourcing and importing coal to meet the deficit, given the surge in international coal prices.

“Given the continued tight domestic coal supply position, coal import dependency for the power sector is expected to increase moderately in the near term and thus, poses a cost headwind for the independent power producers (merchant and competitively bid based projects with no or limited fuel cost pass-through) and discoms, in an elevated international coal price level environment,” rating agency ICRA said in a report on March 31.

The non-power consumers of coal may be impacted more.

A CareEdge research report said, “The share of coal dispatched to the power sector improved to around 83 percent in FY22 from an earlier 79 percent of the total coal dispatched in FY21. Unlike the power sector, the share of coal despatch to captive power plants reduced from 7 percent in FY21 to 4 percent of the total coal despatched in FY22 and the share of coal dispatch to others also reduced from 14 percent in FY21 to 13 percent in FY22. This decrease in supply was on account of the comparatively increased supply of coal to the power sector.”