India's domestic coal-based power plants use more imported coal than imported coal-based plants

Since last year, the government has been invoking section 11 of the Electricity Act, 2003, under which imported coal based power plants have to mandatorily operate to meet the country’s increasing power demand.

Domestic coal-based thermal power plants have pipped imported coal-based plants in consumption of imported coal due to higher blending for power generation.

Domestic coal-based power plants consumed 35.1 million metric tons (MMT) of imported coal in 2022-23, accounting for 63.1 percent of the total coal imports (55.6 MMT) for the sector, according to data from the Ministry of Power. This is a steep increase from 2018-19, when these plants, which otherwise run on coal produced within India, consumed 34.6 percent (21.4 MMT) of the 61.7 MMT coal imported for the power sector during the year.

In the five years between FY19 and FY23, India has added about 10 GW of domestic coal based power capacity. The higher consumption of imported coal by these power plants is primarily because the imported coal was used to blend with domestic coal to ensure higher power generation at a time when local coal output has remained lackluster.

Meanwhile, imported coal based (ICB) power plants, which only use the grades of coal that are imported, consumed 20.5 MMT or 36.8 percent of the imported coal in 2022-23. In 2018-19, the same was as high as 65.3 percent (40.3 MMT) of the total coal imported for the power sector.

The domestic coal based power units are now consuming a lion's share of the total import at a time when the overall import of coal for the power sector declined 9.8 percent from 61.7 MMT in 2018-19 to 55.6 MMT in 2022-23.

Overall import of coal for the power sector declined 9.8 percent from 61.7 MMT in 2018-19 to 55.6 MMT in 2022-23.

The reverse trend, where domestic coal based power plants are using more imported coal than ICB plants, has happened due to a government policy which was first issued last year in May and again re-issued this year to avoid a coal crisis at thermal power plants and ensure continuous generation of electricity despite a steep rise in demand during the peak summer months.

This year, the government issued the order on January 9, where it asked all gencos to use imported coal to the extent of 6 percent of their requirement. This mandate will remain in effect until September this year. Power generation companies (gencos) failing to comply with the directive face restrictions on a pro-rata basis, as per the order.

The consumption by imported coal based power plants reduced over the years because most of these plants remained shut due to high international coal prices and their power purchase agreements (PPAs) did not have adequate provisions for pass-through of the increased cost of generation.

While there are at least 150 domestic thermal power plants, ICB plants are only 15. Some of these include Coastal Gujarat Power Ltd, Adani Power Mundra Ltd, Essar Power Gujarat Ltd, JSW Ratnagiri Ltd, Tata Trombay Ltd., GSECL Sikka Ltd., IL&FS Tamilnadu Power Company Ltd, Muthiara-Coastal Energen, Udupi Power and so on.

But since last year, the government has been invoking section 11 of the Electricity Act, 2003, under which these ICB plants have to mandatorily operate to meet the country’s increasing power demand. This year, the mandate will be in effect till September.

“As per the existing import policy, coal is kept under Open General License (OGL) and consumers are free to import coal from the source of their choice as per their contractual agreement on payment of applicable duty,” Union Minister of Coal Pralhad Joshi told the Lok Sabha on August 9.

Most of the requirement of coal in the country is met through indigenous production. “The focus of the government is on increasing domestic production of coal and eliminating non-essential import of coal,” the minister said.

In 2022-23, coal production in India increased by about 14.77 percent over the previous year. During the current year till July, 2023, domestic coal production has increased by over 9.2 percent compared to the same period of last year. The domestic coal production is estimated to increase to more than one Billion Tonne (BT) in the current year 2023-24, as per the ministry of coal.