Power plants get back to stock building as CIL gradually escalates supplies

Coal India’s (CIL’s) escalating supplies to the power sector have started building up stocks at the plant heads and it is expected to improve to 8 days around Diwali. This would bring out the power plants, dependent on CIL supplies, from a critical stock situation. The increasing supplies have also impacted the power market bringing the average spot power prices down to `3.76 a unit from `14 a unit a week ago.

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Supplies from CIL and other sources to coal-fired plants has reached 2 million tonnes (MT) a day at present against the required 1.8 to 1.85 MT. CIL’s total supplies as of October 17 have been 1.74 MT per day. Stocks started building up at the plant heads when CIL last week raised per day supplies from 1.5 MT to 1.62MT. Coal stocks at power plants have risen to 7.51 MT last week from that of 7.23 MTs, the preceding week.

Even supplies to the non-power sector, which was cut down by half for about a day or two, has more or less restored normalcy, with South Eastern Coalfields (SECL) withdrawing its notice of non-supplies to the non-power sector. Although e-auctions have been suspended from October 13, except for the special forwards’ e-auction for the power sector, it is likely to resume from November after remaining suspended for the rest of the period this month.

With CIL gradually increasing supplies, gencos are not prompted to look for imports since tying up for coal overseas is a major hurdle with China, which produces half of the world’s coal, already having imported more than 4.4 MTs of thermal and coking coal from South Africa against its zero imports between 2015 and 2020. Europe has started sourcing coal from Indonesia, Russia and America to meet their winter demand with gas prices reaching their peak, a coal ministry official said.

Many of the 62 coal-fired plants having FSA with CIL went to supercritical or critical stock position with the stock between one day and six days during September first week, when CIL prioritised supplying to those units offering coal on ‘as is where’ basis through rail cum road mode from sources where the high stock was available. The company had identified 23 such mines carrying 40.3 MT of stock as of August 16.
Although the critical stock position persisted for a long, almost all the 62 power plants, at present, dependent on CIL coal, are out of the critical stock position. There are allegations from a section of power producers regarding over reporting about the quantum of pit headstocks at 99 MT at the start of fiscal and 42 MT at the end of the second quarter of the current fiscal leading to irregularities in supplies. But CIL has been saying the crisis has been owing to regulated intakes.

An NTPC official on the condition of anonymity said the power plants shy away from maintaining stocks pre-monsoon and the monsoon periods since the coal quality supplied degrades for increased oxidation and the miner cannot be charged for supplying low quality since the degradation happens at the plant head. Moreover, with unpredictable power demand, maintaining a low inventory was the new norm to cut down on costs coupled with mounting dues from discoms forcing gencos to tighten their expenditure.

Discoms too were in difficulty for low realisation from both the industrial and domestic consumers and thus the entire chain led to mounting dues of gencos to CIL, which led it to hold back supplies for a few days.

CIL’s dues from the power sector as of date stands at around `16,000 crore. The power ministry has been writing to various state governments to clear their dues to CIL. Nevertheless, CIL has continued supplies through rail and road mode on a war footing, a CIL official said.