Power sector issues: Problem not of coal supply, but of demand from thermal plants

Almost unnoticed, a strange transformation has come about in the power sector. For the last few years the industry has been reeling from a massive shortage in coal, which fuels that vast bulk of power plants in the country. There were days towards the end of last year when power plants had just enough fuel to last a few days. Ideally, a thermal plant should have enoughcoal to last it about three weeks. By the first week of November last year, hit by shortages of domestic coal and a slowdown in supplies of imported coal, the thermal power industry had just enough coal to last it for about five days. More than 50 of 90 thermal plants for which data is recorded reported coal stocks as ‘critical’ — they had less than a week of stocks left. But March onwards the transformation has been dramatic, at least on paper. Coal stocks with power plants, an important measure of the adequacy of fuel, have risen sharply since March. By the last week of August, coal stocks for the thermal power industry had reached 19 days (that figure has since dropped to 16); in other words plants had enough coal by end-August to last them almost three weeks — close to the ideal. Last month, it was reported that Coal India has signed fuel supply agreements (FSA) to supply coal to 16 private power projects with a generation capacity of 14,000 MW, and in which a total of Rs 84,500 crore has been invested. FSAs for nine more projects worth Rs 41,200 crore are also in the pipeline. So what happened? And does that mean the power sector’s coal problems have been fixed? Producers themselves hardly think so.

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Source: ET

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SUMIT KUMAR

Executive at India Electron Exchange

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