Coal inventory slides despite rising production levels

When the Narendra Modi government took charge in 2014, thermal utilities were running low on coal inventory and they made it a priority to reverse the situation.

Three years down the line, power plant coal stocks have fallen dramatically, and are now enough for 11 days of power generation, down from 22 days a year ago, and below the normative requirement of 20 days. This is, of course, still better than the June 2014 level of eight days.

Two reasons can possibly explain this. One, higher power generation may have contributed to higher coal consumption. Second, power plants may have purchased lower quantities, either because they are liquidating inventories or limiting purchases due to supply constraints. Let’s see what the numbers say.

Power generation

In the past year, 12 power plants were added to monitored capacity, adding 10,290 megawatts of capacity or an increase of 8%. Electricity generation was also strong in May, rising by 7% over a year ago, which could have resulted in higher coal consumption and lowered inventories. But this is a seasonal increase and companies should have been prepared for it. The comparable data on coal consumption by power plants is not available, which leaves an information gap in understanding why coal inventories are declining.

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