Volatility in open market power tariff set to reduce with rise in fuel supply: Coal India

State-owned Coal India (CIL) is hopeful that the volatility in open market electricity tariff will reduce in next seven to 10 days, with coal supply increasing at a faster pace.

As of September, the miner is loading 214 rakes (cargo trains) a day, with 194 rakes despatched to the power sector. This is a marked increase from August average of 202 rakes a day and 180 for the power sector.

“If the operations are not disrupted by fresh rains, the number of power stations having critical coal stock will reduce substantially in the next 10 days,” a company source told BusinessLine .

As on Tuesday, eight non-pit-head power stations were having less than three days fuel inventory and another three had less than seven days stock.

The open market electricity tariff has been firming up since June, due to exponential rise in demand. From 4.7 per cent in May, the generation growth reached nearly 12 per cent in July. Yet, the round-the-clock average reached ₹3.12 a unit (kilowatt hour) in August with evening peak tariff touching ₹7.91 a unit.

The rise in tariff has been rapid in September. As on Monday, the peak tariff in IEX was ₹9.61 per unit and the round- the-clock average was ₹5.23 a unit. Even the minimum tariff of ₹3.49 a unit is at least Re 1 higher than the average tariff in June and July.

Industry observers point at anticipated drop in hydel supplies and low coal inventory at power stations coupled with over-dependence of Discoms on short-term as obvious reasons behind the spiralling of electricity tariff.

Beginning last year, both private and state-owned generation companies were storing less coal than mandated by the CEA to cut down on the inventory costs and were expecting CIL and Railways to supply on demand. The strategy failed in the face of sudden rise in demand. The rise in demand came as an opportunity to CIL that suffered from low off-take and piling up of inventory in 2016-17. The miner stepped up despatches by 15 per cent in August. The April-August despatch is 6.6 per cent higher than last year.

However, handling unexpected demand for fuel wasn’t easy. Out of five large power stations in Haryana, four regulated fuel supplies. The result was one has zero fuel stock, one has four days’ stock and three have two days’ stock.

In Maharashtra state-run Bhusawal (1,200MW) and Parli (1,170MW) power stations came back from long stretches of underutilisation to demand coal. Both are now having super-critical fuel inventory.

NTPC’s Dadri power station, which was idling, is suddenly back with a fuel requisition slip. The company is also demanding more fuel for Kahalgaon and Farakka power station, which are witnessing a rise in plant load factor from 75 per cent 90 per cent.

“Coal logistics needs elaborate planning and meeting such sudden demand is not easy,” a CIL source said. In the private sector, 1200 MW Rosa power station in UP, has only three days stock. But the CEA says supply to the power plant should be “based on payment,” indicating solvency issues.

The development, however, came as a boon to railways that suffered from slow growth in cargo movement last year.

Between April and August, the Railways targeted to carry 457 million tonnes of cargo. It ended up carrying 467 mt cargo recording a healthy five per cent growth over last year’s 446 mt. Coal contributes one-third of rail cargo.

COMMENT NOW