Soaring imported coal price to keep power cost high: Ind-Ra

Short-term power prices are likely to remain elevated in the near term on account of a continued increase in imported coal prices, according to rating agency Ind-Ra. The rating agency noted that a large part of the increased power generation would continue to be met through coal-based plants, although coal output is not increasing to the desired level.

This is reflected in low inventory stocks at power plants, and therefore, a part of the increased energy demand will have to be met through imported coal, Ind-Ra said. In light of the expected high imported coal prices, the short-term power prices in India are likely to remain elevated, it stated.

The speedy recovery in power demand post the second wave of COVID-19 infections, coupled with lower than adequate domestic coal production, led to a reduction in coal inventory levels at various power plants, it said.

Coal production by Coal India increased marginally to 209.2 million tonnes (mt) in April-August period of the ongoing fiscal year as compared to 195 mt in the year-ago period, it said. Furthermore, the coal offtake by thermal power plants increased to 259.6 mt in the five-month period this fiscal year.

The average inventory at thermal power stations increased to 38.6 mt in 2020-21, led by a decline in thermal power generation requirement (2019-20: 28.6 mt), it stated. However, it said that with an increase in thermal generation requirement, the inventory levels are now correcting, and have reduced to an average of 23.6 mt in the period under review.

As on September 26, 2021, the inventory levels stood at 8.4mt. As per the critical or subcritical levels of coal stock as per the technical criteria, 103 thermal power plants had less than seven days of stock as on September 26, 2021, it stated.

Ind-Ra estimates an increased imported coal requirement likely in second half of 2021-22 as domestic coal production would increase gradually. Alternatively, in case the PLFs (plant load factor) of imported coal-based plants would continue to remain low due to high international coal prices, Ind-Ra estimates the energy deficits are likely to increase in the second half.

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