Extended rains hit coal supply to power plants and raise spot prices

Incessant rains coupled with low rake availability have impacted coal supply to power plants, especially in the northern region. Coal supply at the spot auction has also been hit, leading to high bid prices. 

Coal companies call this a temporary phenomenon but have expressed their reservations over rake availability. The price in the spot auction touched a new high of Rs  2,966 per tonne in August, while the supply remained tepid. 

For low coal supply to power plants in the north, the three coal companies under Coal India – Eastern Coalfields, Mahanadi Coalfields and Central Coalfields Limited — have cited logistical constraints. The companies have told the ministry of coal that rake supply in the up direction (towards northern region) has been less. The firms were replying to the ministry's query especially about Haryana. 

“Though ECL has a fuel supply agreement of small quantity with power plants in Haryana, it is in a position to meet the requirement of these plants. But frequent restrictions by the Railways in movement of rakes upcountry are badly affecting supplies to these power houses and the number of rakes supplied to these power houses is much lower than the demand submitted to Railways for supply,” said ECL’s reply to ministry of coal, reviewed by Business Standard.

CCL said the state-owned Aravalli power plant in Haryana had earlier regulated purchases but was now demanding more coal. “It is observed that in spite of sufficient offers/allotments, the railways have supplied less number of rakes to these plants for loading from the sidings of CCL. CCL has been regularly taking up with the Railways the augmentation of rake supplies to Haryana plants,” said CCL’s reply. 

CCL executives, however, said this is a temporary phenomenon and extended period of heavy rains has led to tepid mining activity and lower number of rakes. “Rain during August 2018 was 24 per cent more than last year in the CCL command area. Despite this, we are moving 27 rakes per day and hope to have 33 rakes in some days when the monsoon recedes,” said the executive, requesting anonymity. 

Coal India executives said coal despatch to the power sector increased to 197 million tonne (mt), during April-August 2018, registering a growth of 12.7% on a year-on-year comparison. It also said CIL’s average rake loading per day jumped to 205.4 rakes, during the same period, to power sector, against 183.8 rakes on during same period last year. 

In its note to the coal ministry in January this year, the power ministry said the sector would need 615 mt coal supply in the coming fiscal. This would also entail higher demand of railway rakes of 288 per day to meet the demand.