By Sudheer Pal Singh & Mansi Taneja
The government might have announced diversion of spot market coal to bridge the supply shortages for long-term consumers in the power sector, but experts see the move as “grossly inadequate”. As coal shortage has touched unprecedented levels, coal stock position at power stations has gone from bad to worse forcing the power industry to brace itself for a possible closure of some units.
A host of issues including heavy rains disrupting coal supply, workers’ strike at largest producer Coal India and Telangana agitation in the South have snapped fuel supply at power stations over the past month. More than half of the country’s 86 thermal power stations are currently running at “critical” stocks of less than seven days, while more than a third of the plants have become “super critical”, according to Central Electricity Authority (CEA), the apex power sector planning body.
The crisis has even made short-term power prices and volumes at the exchanges go haywire. “The average power tariff has increased to around Rs 7-7.50 per unit, from Rs 2.5-3.5 about 20 days back, due to mismatch in demand and supply. The traded volume in the exchange has come down to 35,000MW/hr from 1 lakh MW/hr on a daily basis,” India Energy Exchange senior vice president for business development Rajesh Mediretta said.
The crisis has even made short-term power prices and volumes at the exchanges go haywire. “The average power tariff has increased to around Rs 7-7.50 per unit, from Rs 2.5-3.5 about 20 days back, due to mismatch in demand and supply. The traded volume in the exchange has come down to 35,000MW/hr from 1 lakh MW/hr on a daily basis,” India Energy Exchange senior vice president for business development Rajesh Mediretta said.
The situation is unprecedented. “This is surely one of the most critical situations that we have faced ever,” power secretary Anil Razdan told Business Standard. “The lesson to learn is that we cannot leave the coal production programme entirely in the hands of a monopoly,” he added, referring to dismal performance of Coal India that supplies over 80 per cent of India’s coal.
Other experts were equally depressed. “The current crisis is probably the most unprecedented scenario ever. I have not seen supply for power plants being hurt to such an extent in the past many years,” said a senior power sector analyst from an accounting and consultancy firm.
The ongoing crisis had forced the coal ministry to announce earmarking a part of the 4 MT coal sold through e-auction to meet shortages in Fuel Supply Agreements (FSAs) yesterday. Experts were not too optimistic over the move and called it “a temporary relief measure” at best.
“The quantity to be diverted from e-auction would be a major issue. Making available only a part of 4 MT quantity from the spot market would not make a huge difference. It cannot be a sustainable long-term strategy,” said Shubhranshu Patnaik, Senior Director, Deloitte Touche Tohmatsu.
He also added that another issue with the coal ministry’s formula of diverting e-auction coal was logistics. “Coal sold through auction is not spread across the country. It is not made available (CIL) subsidiary-wise. Transporting this coal from one region where the mine is located to another region where a plant is situated would become a problem,” Patnaik said.
Demand for coal in India has grown at an annual rate, exceeding 8.4 per cent over the past five years. Supply has, however, fallen grossly short, registering a dismal annual growth rate of 5.4 per cent during the same period. For 2011-12, while India’s coal demand is estimated at 696 MT, 554 MT is likely to be available, leaving a gap of 142 MT to be met through imports.
Coal Minister Sri Prakash Jaiswal, who has chaired multiple urgent meetings with coal ministry officials and chairmen of Coal India subsidiary companies in the past one week assured of making supplies available. “Production and offtake has been less than target in the past two months. Mahanadi Coalfields and Northern Coalfields are among the major defaulters. But I have been assured the situation is only temporary and will improve soon,” he said.
Acting to avert the crisis, the coal ministry has promised smooth coal availability for plants facing the heat, particularly in the northern region. The ministry has also increased daily supply of rakes to 169, including 148 rakes for the power sector. “Total despatches are likely to further increase to 180 in the next few days, of which 145 rakes will be supplied to power plants,” a release issued by the ministry read.
However, the domestic power industry has sounded the alarm bells saying closure of some extremely critical units could be imminent. “If there is not enough coal to tide over the lead time (during which the fuel is transported from mine head to the station) as the crisis continues, closure of at least some units is obvious,” Ashok Khurana, Director General of Association of Power Producers (APP), told Business Standard.
The crisis is impacting even merchant power generation.
Out of the 4,000 MW demand for traded power, only 1,500 MW is met as there are not enough sellers on the exchanges, said Mediretta. Jindal Steel and Power, Lanco Infratech and JSW Enregy are currently among the highest traders in merchant power.
According to another power industry expert, this trend will continue for some time as the distribution companies are going out of the way to tie-up the power because of the low supply scenario. He said the merchant power rates will remain on the higher side, till the issues is addressed.
(sourced Business Standard)
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