In April, Coal-Fired Electricity Generation Increased By 9%

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In April, coal-fired electricity generation increased by 9.26% to 1,02,529 million units (MU) compared to the same month the previous year. This comes as the country experiences a power outage. According to official data, the thermal power generation in April 2021 was 93,838 MU. “Coal-based power generation increased by 9.26% in April 2022 compared to April 2021, and by 2.25 percent compared to March 2022,” the report stated. Thermal power generation increased by 2.25 percent in April, compared to 1,00,276 MU in March, according to the report. It noted that overall electricity generation grew 11.75 percent last month to 1,36,565 MU, up from 1,22,209 MU the previous month.

“Total power generation climbed to 1,36,565 MU in April 2022 from 1,33,584 MU in March 2022,” it added. The coal ministry previously stated that the current power problem is primarily due to a dramatic fall in energy generation from various fuel sources, rather than a lack of domestic coal. Coal Secretary A K Jain told PTI that the low coal stocks at power plants were due to a number of factors, including increased power demand following the pandemic, the early arrival of summer, rising gas and imported coal prices, and a sharp drop in electricity generation by coastal thermal power plants. He went on to say that a plethora of steps are already in the works to improve the country’s overall electricity supply. The situation was exacerbated by the country’s dramatic drop in gas-based electricity output.

Because of the substantial spike in the price of imported coal, the coastal thermal power plants are presently producing roughly half of their capacity. As a result, there is a disconnect between electrical demand and supply. States in the South and West, according to the secretary, are reliant on imported coal. When domestic coal is delivered to these states’ facilities through wagons/rakes to compensate for the loss of imported coal generation, the rake turnaround time is more than 10 days, causing delays rake availability issues for other plants. Since last year, the railways have loaded more coal than ever before, despite reducing rake delivery to other industries to satisfy the increased demand for power. In March, there was a lot of rake loading.

Higher coal imports may increase discom power supply costs by 4.5-5% in FY23, according to ICRA.
In order to fulfil the growing demand for energy, all states and power generating companies (gencos) based on domestic coal will be required to import at least 10% of their fuel consumption for blending with domestic coal. Icra stated on Tuesday that government plans to address electricity supply restrictions by increasing coal imports are projected to raise discoms’ supply costs by 4.5-5.0 percent in 2022-23. According to Icra NSE -0.14 percent, on May 5, the Ministry of Power (MoP) issued an order under Section 11 of the Electricity Act, stating that all imported coal-based power plants must run and generate power at full capacity to fulfil growing demand.

In order to fulfil the growing demand for energy, all states and power generating companies (gencos) based on domestic coal will be required to import at least 10% of their fuel consumption for blending with domestic coal. The ministry’s directive is in effect until October 31, 2022. Because current power purchase agreements (PPAs) do not allow for a pass-through of fuel costs for these projects, a committee comprised of representatives from the Ministry of Power, the Central Electricity Authority, and the Central Electricity Authority Commission will determine the tariff for supply from these plants under PPAs, taking into account current coal prices. State gencos and IPPs (independent power producers) were advised by the Ministry of Power in December 2021 to meet their coal demand by blending imported coal to the tune of 4%. The directive was issued in light of the slow improvement in the average coal stock level for thermal generation capacity across India, as evidenced by the stock position of 8 days on May 7, 2022, compared to 9 days in November-2021, which had recovered from a low of 4 days on September 30 last year, as compared to the normative requirement level of 24 days.

According to Girishkumar Kadam, Senior Vice President and Co-Group Head – Corporate Ratings at Icra, all-India energy demand increased by 11.5 percent and 17.6 percent year over year in April and May 2022, respectively, owing to heat waves and weather conditions, while tight domestic coal supply and high international coal prices continued to affect energy generation levels. As a result of the MoP’s actions, the power sector’s coal import dependency is expected to rise from around 4% in FY2022 to around 12-13% in FY2023, he noted.

“Considering the increase in the share of imported coal and coal price level at USD 110 per MT for coal gross calorific value (GCV) of 4,200 kcal/kg as directed by MoP, the higher share of imports for thermal generation under a pass-through arrangement is further expected to lead to an increase in the cost of supply for state discoms by 4.5-5.0 per cent in FY2023 at an all-India level,” Kadam said. Despite a rise in international coal prices of more than 150 percent over the previous 12-month period, the share of coal imports in the power industry fell to around 4% in FY2022 from 8% in FY2021.

According to Vikram V, Vice President & Sector Head – Corporate Ratings at Icra, the estimated increase in the cost of supply for discoms, combined with a higher share of coal imports to meet demand, is expected to push the cash gap per unit for discoms at the all-India level to 68 paise per unit in FY2023, up from 50 paise per unit previously estimated. “This assumes a 5% rise in supply costs and a 4.5 percent increase in discom tariffs across the country. As a result, regulators’ timely and proper tariff determination, as well as the timely implementation of fuel cost adjustment (FCA) pass-through, remain critical monitorables for discoms “He continued.

The outlook for state-owned distribution utilities remains bleak, owing to their persistent financial difficulties as a result of inadequate rates, higher-than-allowable distribution loss ratios, and insufficient reliance on subsidies. Nonetheless, operational strengths originating from demographic profile, operational efficiencies, tariff adequacy, and sponsor strengths continue to sustain the credit profile of privately owned distribution utilities.

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