Power Ministry and private units in a bind over coal supply shortage

Even with claims of record high coal output, the power ministry agrees there is a supply problem to thermal power units. 

To meet the shortfall in coal supply, the power ministry has asked the power generators to import coal to build stock. Sources said the ministry might urge the prime minister’s office to look into the shortage. It has also proposed a change for the arrangement in this regard, beside suggesting thermal power producers’ import it if needed. 

The minimum level of coal supply to a plant should be increased to 100 per cent of the demand, proposes a power ministry note, reviewed by Business Standard. It is currently 75-90 per cent. 

This comes at a time when the price of imported coal has touched $110 a tonne, a five-year high. The normal import price is $45-60 a tonne. 

The coal ministry, however, maintains the supply has improved. "Coal India,” said minister Piyush Goyal of the near-monopoly producer, in a written reply to a Rajya Sabha question on July 20, “dispatched 40.07 mt to power plants in April, an increase of about 14 per cent over the dispatch in April 2017. Coal stock at thermal power plants increased from 7.3 mt on October 19 to 15.89 mt as on end-April.” 

The supply position at major power plants is below the optimum level of 12-15 days. At the same time, the price of coal offered under special forward e-auction (SFEA) by Coal India (CIL) to privately owned power generators has shot up, with the quantity reducing during the past two quarters. SFEA was started in 2016 to make available more in the open market for privately run units which lack a long-term Fuel Supply Agreement with CIL.South Eastern Coalfields (SECL) and Mahanadi Coalfields (MCL), both subsidiaries of Coal India, are the two main SFEA suppliers. Power generators have alleged supply from these two have dwindled. MCL has also over months faced coal evacuation and mining issues, due to repeated labour unrest. 

After offering 31 mt in November 2017, the quantity under SEFA was only 3.5 mt in May 2018, according to the latest data on the coal ministry’s website. The price quoted was 81 per cent over the notified price during the same period. Last winter, the price discovered was 19-15 per cent higher.

CIL offered 42 mt under SFEA for 2018-19. This was equivalent to the previous year's amount but was 34 per cent less than the offer in 2016-17, of 63.4 mt. “The drop in the total was majorly due to a drastic drop in quantum on offer by SECL and MCL (which together contribute more than half of CIL's total production),” said the Association of Power Producers (APP) in its latest letter to Goyal.

Coal-run power plants have complained about supply from MCL being hit, as mentioned earlier; MCL had admitted to this in a statement last month, about mining at its largest field, Talcher, being suddenly hit.