India: Govt asks power plants to import coal amidst shortage

The Core Management Team (CMT), the committee constituted to regulate coal supply to plants facing acute shortage of the fuel, has asked the power producers to explore the import market in order to meet their requirements.

The provision is applicable for the plants which utilise imported coal for blending with domestic grades so that the burden of increased coal supply on the part of Coal India Ltd (CIL) can be eased to an extent.

Not so long ago, the government had been critical of the imports made by such plants for blending given the ample coal availability in the country. However, in order to tide over the current coal supply crunch, the costlier route of sourcing is being proposed to avoid any shortfall in electricity.

As on 30 Aug'21, coal stocks at power plants have fallen to a fresh low of 12.96 million tonnes (mn t), sufficient for seven days of power generation.

Are imports feasible?

Data provided by the power ministry indicates that coal imports by power plants for blending purposes increased 5% y-o-y to 3.07 mn t during the first quarter of FY'22, which was only 27% of the total volume.

Lately, power plants have shown little appetite for imports amid soaring coal prices. Moreover, supply disruption in Indonesia due to heavy rains and strict quarantine rules on rising Covid cases have worsened the situation.

As per CoalMint's Assessment, offers for Indonesian 5,000 GAR coal, ex-Kandla, were assessed at INR 7,900/t.

Given the high prices of coal with higher calorific value (CV), there are chances that buyers would seek low CV coal imports. But, with weak supply dynamics supporting the pricing, the likelihood of a gradual rise in electricity cost is inevitable.