This will be the first time in more than three years when the government will not impose such a mandate on domestic coal based power plants. The coal ministry has enough stock for power plants
On March 4, Central Electricity Authority chairperson Ghanshyam Prasad said India's peak power demand this year could even hit the 260 GW mark.
India is the world's third-largest consumer of energy, with an annual electricity demand increase of about 4.7 percent. Amid record-breaking demand, the country witnessed an 8.18 percent surge in overall power generation from April to October, compared to the same period of the previous year.
Data from the Ministry of Coal showed that domestic coal-based power generation from April to October 2023 reached 686.7 billion units (BU), reflecting an 8.88 percent increase from the 630.7 BU generated in the corresponding period last year.
Acting on the shortage, the Ministry of Power on October 25 directed all thermal generating stations, including Independent Power Producers, to mandatorily blend imported coal at 6 percent of their total capacity till March 2024. Until now, the mandate was limited to 4 percent.
The eight-month long extension has been directed by the Ministry of Power owing to a surge in electricity demand, inadequate supply of domestic coal and reduced hydropower generation.
The peak power demand met during the day hit a record high of 240 GW on September 1. However, the power shortage or the demand that could not be met also hit a record high of 10 GW
Due to the surge in power demand and subsequent load-shedding, the Central Electricity Regulatory Commission on August 15 also directed all power distribution companies to promptly requisition their power needs to the generating companies
Given the country’s growing shift to renewable energy, the coal ministry has decided to foray into thermal power plants, and not just mine coal.
The reverse trend, where domestic coal based power plants are using more imported coal than ICB plants, is due to a government policy aimed at ensuring continuous electricity generation to meet the rising demand.
On June 9, the non-solar or nighttime peak power demand also remained as high as 214.2 GW. On June 12, it was 213.53 GW.
India consumed a record 223.23 GW of electricity on June 9 as heat waves hit several parts of the country. The demand is expected to rise further, as per power ministry officials
The government has asked all power plants that use imported coal to operate at full capacity, anticipating an increase in peak electricity demand in the country.
Adani Enterprises Ltd had emerged as the lowest bidder for the short-term coal supply tender but the contract was not awarded
While Coal India has little experience in importing coal, the government has roped it in to import coal to supplement coal availability after the country faced a power outages in parts in March-April due to fuel supply constraints. There are concerns over coal availability after monsoon.
The use of imported coal would increase the electricity tariff by 70 paise to one rupee per unit, says the All India Power Engineers Federation. The total additional cost burden on the states on account of imported coal would be in excess of Rs 24,000 crore.
Around 8,000 megawatts of imported coal-based power plants are currently shut, as operations became unviable due to high coal prices.
As power demand continues to soar even as power generators scramble for fuel, the government has asked all imported coal-based power units to run at full capacity by invoking Section 11 of the Electricity Act.
It is the first time in recent years that a major government tender for imported coal has been cancelled over high prices.
Lower dependence on imported coal and tariff relief for affected projects is positive for the power sector but timeline for implementation of tariff relief is still unclear, domestic ratings agency Icra said.
Shankar K of Edelweiss Securities says he was expecting the bidding to be aggressive for the power sector especially since there is a huge mismatch between demand and supply.
Arup Roy Choudhury, the chairman and managing director of NTPC, believes the penalty on supply defaults will be hiked once Coal India succeeds in ramping up its production capacity.
Power producers have sought the government's intervention to ensure cheaper coal for their use. In the recent meeting with the prime minister, power producers sought the removal of 5% customs duty and 5% CVD on imported coal.
Fitch Ratings has come out with its special report on power projects. According to the rating agency, due to the increasing cost of imported coal, which has doubled to about USD120/tonne currently (over FY09 prices), the variable cost of power generation has surged.