Power, coal sectors show new face

New records are getting created in the power and coal sectors, thanks to a combination of oversupply and lower demand.

For the first time in recent memory, at least six states and Union Territories have, last month, registered a zero power deficit. These are Chandigarh, Uttarakhand, Madhya Pradesh, Dadra and Nagar Haveli, Lakshadweep and Sikkim. Six other states recorded a deficit of less than one per cent deficit: Gujarat (0.1 per cent), Odisha (0.2 per cent), Rajasthan and Meghalaya (0.4 per cent), West Bengal (0.5 per cent) and Manipur (0.9 per cent).

Also, the coal stock position at power stations is at a high. Only eight (a record low) of the 92 coal-based stations in the country were on July 30 running on critical stocks, defined as enough to sustain operations for less than seven days. Of these eight, two were critical owing to their own unloading constraints and fund crunch, rather than less coal supply. For comparison, 33 stations were critical at the same time last year.

Noticeably, four of the six power plants still battling a coal crunch are located in Andhra Pradesh — Kothagudem, Ramagundam, Simhadri (Visakhapatnam) and N Tata Rao (Vijayawada) stations. The other two are in Karnataka and Maharashtra. Additionally, Lanco’s Anpara (UP) power plant is running on critical stocks owing to the company’s “fund constraints”. The Uttar Pradesh Rajya Vidyut Utpadan Nigam Ltd’s Parichha power plant (at Jhansi) is critical due to unloading problems.

The development vindicates the recent claim by state-owned monopoly miner Coal India Ltd (CIL) that at least five states have asked for curtailing  supplies, fearing huge stocks of the fuel might catch fire. CIL pulled up its supplies to power companies after an acute fuel crunch for power plants threatened to make investments unviable. CIL’s total offtake grew three per cent to 153 million tonnes (mt) in the April-July period, even as production increased by only one per cent.

Also, consider the spot market trends. CIL sold 11.2 mt of coal through spot e-auction in the first quarter (April-June) of this financial year. This was a mere 2.7 per cent increase over the 10.9 mt in the same period last year. Also, the price of coal sold in the first quarter was a mere 44 per cent increase over the notified price. In the same period last year, the price was 65 per cent more. The twin trends point at a surprising slump in demand.

“There are not many takers for coal in the spot market. Why should there be so much noise over lack of coal availability, particularly from power companies? This is surprising,” a top CIL executive said.

With the reduced demand and prices, CIL’s first quarter profits took a beating, owing to the erosion of revenue realisation at e-auction.

Similarly, power prices in the spot market have declined 26 per cent over the past year. The average price at the country’s largest power exchange, Indian Energy Exchange (IEX), for day-ahead supply came down to Rs 2.14 a unit on Wednesday as compared to Rs 2.89 a unit on the same day (August 14) last year.

The lowest price on Wednesday was a surprising Rs 1.70 a unit. For comparison, the average cost of production for NTPC, the country’s largest and cheapest power producer, is currently a little over Rs 3 a unit.

Experts said improved availability and depressed prices are likely to continue for some time, though these might change with economic recovery. “The fall in e-auction prices is reflective of subdued prices in the international market. Supply is likely to rise as new projects, initiated between 2009 and 2011, get commissioned this year and next year,” said Dipesh Dipu, partner at Jenisse Management Consultants.

He added the Indian domestic market demand for coal is also likely to be rationalised from the optimistic highs of the recent past, which resulted in close to 30,000 Mw of stranded capacity. Also, a better monsoon this year has helped ease the pressure on coal supplies. Another reason for the jump in imported coal demand is the latest announcement of pass-through of imported coal cost for generators.