Power demand revival energises coal output

India’s coal production rose over 21 per cent year-on-year (YoY) in September 2020, according to the index of eight core industries compiled by the Ministry of Commerce and Industry.

Sector watchers point to increased power consumption in States such as Himachal Pradesh (6 per cent YoY growth), Punjab (8 per cent), Uttar Pradesh (18 per cent), Uttarakhand (5 per cent), Gujarat (5 per cent), Madhya Pradesh (25 per cent), Bihar (12 per cent) and Jharkhand (18 per cent).

Increased consumption

“A close to 350 million units increase is contributed by ArcelorMittal Nippon Steel Ltd (formerly Essar Steel).

“Peak demand is up due to a variety of other factors, too — agriculture pump-sets being used for irrigation (this is the rabi season), and employees from service hubs such as Bengaluru, Delhi, Chennai and Hyderabad moving back to their hometowns (due to the lockdown and continued closure of offices) leading to increased residential electricity usage,” said Deepak Krishnan, Associate Director for WRI India’s Energy Programme.

“Another possibility, especially in States like Uttarakhand, Himachal and Gujarat, is the increased operation of pharmaceutical industries for drug production to fight Covid,” he added.

The higher coal output is led by Coal India’s production of 40.51 million tonnes (mt) in September 2020 compared to 30.78 mt in September 2019, up 31.6 per cent. Coal India also said offtake was 46.46 mt in September 2020 (35.28 mt).

Output decline in 2019

The coal output growth YoY is also due to a low base effect. In contrast to the increase in production this year, there was a significant decline in domestic coal output during August, September and October 2019. The low base effect is expected to play out in October 2020, too. Coal output had contracted in October 2019 following the late withdrawal of the monsoon and labour issues in some mines.

Coal supply in 2020 has also outpaced demand from power generation units with almost all thermal projects having sufficient days of coal stock. This is a stark deviation from previous years, since power projects perpetually suffered from delayed coal supplies earlier.