Power companies allowed to import 10% of their coal requirement
What's the story
In a bid to mitigate the supply issues faced by India's coal-fired power plants, the Power Ministry on Tuesday reportedly allowed the power producers using domestic coal to import up to 10% of their coal requirement. The move comes as several power plants in the country have been facing a severe shortage of coal supply amid increasing demand for power. Here are more details.
Details
Decision will boost coal inventory within a week: Official
Speaking to The Indian Express, a government official said the move would help the power plants to boost their low coal inventory within a week. Further, addressing the sharp rise in international coal prices, the official maintained that the 10% blending of imported coal would only lead to a 20-22 paise per unit (kilowatt-hour) increase in the price of power.
Information
How will power plants meet their import cost?
According to the official, to make up for the import cost, power plants could sell power on exchanges or agree to higher rates with buyers under power purchase agreements (PPAs). This will pass on the cost to distribution companies (DISCOMs), the official noted.
Situation
Power demand to decline in second half of October: Official
The official further said that the increasing power demand is expected to decline in the second half of October, thereby easing the pressure on coal stocks. Talking about how soon coal can be availed, he said, "Normally, it takes 20-25 days, but if some ships are on the move and generators can contact them, they can get it earlier also, potentially in seven days."
Context
Centre advised power plants to cut coal import last year
However, in 2020, the Centre had advised power plants to reduce their coal imports keeping in mind the skyrocketing global prices due to a coal shortage in China. According to CEA data, coal import by Indian firms reduced by 42% between August 2020 and August 2021. Indian firms reportedly imported 1.9 million tonnes of coal in August 2021.
Exchange
Power prices increased manifold on exchanges: Report
Meanwhile, due to the coal shortage, power prices are increasing manifold on power exchanges. Purchase bids on the Day-Ahead Market (DAM) on the India Energy Exchange (IEX) on October 12 were for 430,778 MWh, up from 174,373 MWh a month ago. Further, the market price for one unit is Rs. 15.85, which is almost seven times higher than Rs. 2.35/unit a month ago.
Recent news
Centre warned states against selling power on exchanges
Separately, the Centre on Tuesday warned states against selling power on exchanges at higher prices. The Centre said that states were resorting to load-shedding in some areas while selling power at higher rates on exchanges. It warned that the states found selling power on exchanges would lose their share of 15% "unallocated power" from central generating stations.