India coal crisis: Power Ministry issues guidelines, enables imported coal power plants to sell in markets

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KEY STORY

  • India is running low on coal. 8 power plants in Uttar Pradesh have stopped functioning and six other power plants have been shut in the state due to other reasons, taking the total of temporarily stopped power plants to 14. Besides Uttar Pradesh, several other Indian states are facing a coal crunch. The Delhi government, on Saturday, hinted that the capital could soon run out of power.
  • An inter-Ministerial sub-Group led by the Ministry of Coal has been monitoring the coal stock situation twice a week. In order to manage the coal stock and ensure equitable distribution of coal, Ministry of Power constituted a Core Management Team (CMT) on August 27 comprising of representatives from MOP, CEA, POSOCO, Railways and Coal India Limited (CIL) to ensure daily monitoring. The CMT is closely monitoring and managing the coal stocks on daily basis and ensuring follow-up actions with CIL, Railways to improve the coal supply to power plants.
  • CMT in its meeting held today reviewed the status. It was noted that on 7th Oct, 2021 total dispatch of coal by Coal India Limited (CIL) touch 1.501 MT thereby reducing the gap between consumption and actual supply. Ministry of Coal and CIL have assured that they are making best efforts to increase dispatch to power sector to 1.6 MT per day in next three days and thereafter try to touch 1.7 MT per day.
  • It is likely to help in a gradual build up of coal stocks at the power plant in near future. The coal supply, as well as consequent power situation, is likely to improve.
  • According to CMT, there are four reasons for the depletion of coal stocks at the power plant end- unprecedented increase in demand of electricity due to revival of economy; heavy rains in coal mine areas during September 2021 thereby adversely affecting the coal production as well as despatch of coal from mines; increase in prices of imported coal to unprecedented high level leading to substantial reduction in power generation from imported coal-based power plants leading to more dependence on domestic coal; non-building of adequate coal stocks before the onset of Monsoon.
In order to deal with the crisis, the Government has issued certain guidelines:
  • Where the procurer does not requisition power from the power plant with which he has signed the Power Purchase Agreement (PPA), upto 24 hours in advance prior to 00.00 hrs of the day of delivery of power, the generator shall be free to sell the unrequisitioned power in the power exchange.
  • Where the procurer decides not to schedule power for any period, either full or part capacity, from the generating station with which he has signed the PPA, which may be more than 24 hours in advance, the generator shall be free to sell the un-requisitioned power, for the period for which it has not been requisitioned, in the power exchange.
  • The developer and the procurers having the PPA would share the gains realized from sale, if any, of such un-requisitioned power in (i) and (ii) above in power exchange in the ratio of 50:50, if not otherwise provided in the PPA. Such gain will be calculated as the difference between selling price of such power and the Energy Charge Rate (ECR) as determined under section 62 or section 63 of the Electricity Act 2003.
    • The obligation for the procurer with regard to the fixed charges shall remain same in accordance with the pp A.
    • The above provisions shall apply both for the power plants whose tariff has been determined under Section-62 or Section-63 of the Electricity Act 2003.
    As per the guidelines, the power plants shall continue to have obligations and duties to make their plants available
    as per the terms of the pp A.
    It is worth adding that as per CMT, power consumption for the period August-September has progressively increased from 106.6 BU per month in 2019 (normal non covid year) to 124.2 BU per month in 2021. During this period the share of coal-based generation has also increased from 61.91% in 2019 to 66.35% in 2021. As a consequence, total coal consumption in the month of August-Sept, 2021 has increased by 18% in comparison to corresponding period in 2019.
    Additionally, imported coal price of Indonesian coal jumped from $60/ton in March-2021 to $160/ton (in Sept /Oct 2021) of 5000 GAR (Gross as received) coal. The import of coal has decreased in comparison to 2019-20 due to import substitution and rising prices of imported coal. The reduction of imported coal is compensated by the domestic coal for power generation, hence increasing the demand for domestic coal further. As compared to 2019, there has been a 43.6% reduction in power generation from imported coal which led to extra demand of 17.4 MT of domestic coal during Apr-Sept,2021.
    Ministry of Power issued these guidelines for operationalizing optimum utilization of generating stations as per the requirements in the Electricity Grid. These guidelines will enable imported coal-based plants (having sufficient coal) to operate and ease out the burden on domestic coal.

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