States restart imports of coal after domestic supply fails to meet demand

Elections, rising power demand derail 'zero coal import' plan

The central government’s plan to completely rely on Coal India for domestic needs and have zero imports has faltered with states putting out tenders for importing coal. Tamil Nadu, Karnataka, Maharashtra, Gujarat along with NTPC and private units in Punjab and Madhya Pradesh have issued tenders totalling 12.5 million tonne.

In 2017, Coal Minister Piyush Goyal announced that India does not need any imported coal and instructed states and NTPC to stop imports. Subsequent to that, several power access schemes and a weaning effect of demonetisation and implementation of goods and services tax (GST) saw power demand shooting up. Domestic coal supply couldn’t match the rise in demand.

In the summer of 2018, Power Minister R K Singh allowed states to import coal as a “coal deficit would continue for 2-3 years”. Goyal said it’s temporary.

Tamil Nadu in its two tenders of 1 million tonne each says, “TANGEDCO is using imported coal to make up for the shortfall in supply of indigenous coal to its thermal power stations in Tamil Nadu.”  TANGEDCO, or Tamil Nadu Generation & Distribution Company, is the designated authority to import for state-owned thermal power units.

NTPC was the first to issue a tender of 5 million tonne of imported coal last year. Following suit were Maharashtra and Gujarat with 2 million tonne each, and now it’s Karnataka and Tamil Nadu. Vedanta Energy-run Talwandi Sabo power unit in Punjab and Hindustan Power’s MB Power in Madhya Pradesh have also issued tenders for imported coal. MB Power has been awaiting coal linkage for two years now.

“We have requested MAHAGENCO (Maharashtra State Power Generation Company) to float tenders for importing coal, details on the process we are not privy about. We are in discussion with generators on the coal shortage and expect that by April-May the situation should see an improvement,” Sanjeev Kumar, managing director for Maharashtra State Electricity Distribution Company (MSEDCL), told Business Standard.

In a Rajya Sabha reply, Piyush Goyal said during April-October 2018 (the first seven months of the current fiscal year) the import of coal was 136.58 million tonne with a growth rate of 14.91 per cent. He however added that during the same period, Coal India supplied 315.94 million tonne of coal to the power sector at a growth rate of more than 8 per cent compared to the corresponding period of last year.

“State-owned utilities in India were allowed to import coal late last year as stockpiles declined to only one day of coal burn. Since the past seven or eight months, several state-owned utilities have launched tenders for imported coal,” said Deepak Kannan, Managing Editor, S&P Global Platts. He added that power plants located close to coastal areas still find imported coal economical currently, as prices have subsided in the past few months.

The price of FOB Kalimantan 4,200 kcal/kg GAR coal has had a roller coaster ride in the past one year, touching an all-time high of $51/tonne in February last year, before shedding gains to be assessed on January 9, 2019 at $31.05/tonne, according to S&P Global Platts data.

Despite falling stockpiles at Indian utilities, several buyers stayed away from the seaborne market last year amid the high coal prices as well as the weak Indian rupee, Kannan said, adding that the domestic coal production has also been on the rise despite failing to meet targets. Coal India produced 412.45 million tonnes in April-December 2018, up more than 7 per cent year-on-year.

“The company has set an output target of 652 million tonnes for the current fiscal year. However, logistics issues have hampered any demand for domestic coal, with prolonged waiting time for railway rakes to evacuate coal from the mine mouth to the power plants,” he said.

Riding on rapid electrification drive and reversal of muted industrial demand, power demand is on a rising trend. During the April-September period of last year, power demand has registered a healthy growth rate of 7.6 per cent, highest in the past five years. With general elections in months from now, power demand is set to rise further.