Coal demand bucks monsoon trend, zooms in August

Pratim Ranjan Bose Kolkata | Updated on January 09, 2018 Published on August 29, 2017

Coal-based power plants replenish stock to fill deficit in hydropower

Coal production and off-take are usually subdued in the monsoon months. But this year is proving to be an exception.

As on August 26, Coal India’s monthly production rose by 20 per cent and off-take or sales, the most important parameter to assess the availability of fuel, was up by 21 per cent. Total off-take in the April-August period increased by 6.6 per cent, which is a record.

That coal production increased dramatically during the monsoon season is seen from the fact that the cumulative production from April to August was down by 1.7 million tonne compared to last year.

Output was purposely kept low to liquidate stock that reached a humongous 68 million tonne end of the last year. As on August 26, the stock was down 45 per cent to 37 mt. Pit-head stocks bring book profit in CIL’s account. However, the quality of coal and its value deteriorates.

But this surge in coal production in August has not been driven by a corresponding rise in energy demand.

Excess rains forced hydropower to open the gates leading to a sharp fall in generation. As on August 23, hydropower generation was approximately 15 per cent lower than the expected volume. Last year’s performance will only be known after the monthly reports are published.

The gap in hydropower supply was filled by coal-based facilities, which is generating two per cent more than the planned estimates in August. The total generation is also two per cent lower than targeted.

So the demand for energy has lagged the demand for coal.

The answer to this mismatch lies in changed inventory management practices of power plants, especially the private power plants. These plants are deviating from the CEA guidelines for coal stock to cut costs and are insisting on just-in-time supplies from CIL.

Due to stiff competition on the tariff front and excess supplies, power producers had been trying to reduce coal inventory costs since last year. The strategy was adopted this summer and in August too.

For CIL and the Railways, this calls for more efficient logistics planning, which they have so far managed to do.

“The significance of the off-take number lies in our ability to meet the sudden rise in demand,” said a CIL official.

It is now to be seen how the Railways copes up with this strategy in the harvest season when high demand for coal-based power coincides with high demand for rakes to move agri-commodities.

Published on August 29, 2017
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