A lack of level-playing field between government-owned power plants and private players has resulted in a decline in the plant load factor (PLF).
PLF is the ratio of average power generated by the plant to the maximum power that could have been generated in a given time. More PLF results in more revenues and lesser will be cost of per unit (kWh) energy generated.
The discrimination against private players in coal-based power plants and the lack of a level-playing field with government entities has become a cause of concern in the last few years.
As per Central Electricity Authority (CEA) data, Power plants with the central government backing improved its PLF from 72.4 per cent in FY18 to 72.8 per cent in FY19. Further, the national average PLF was 60.9 per cent in fiscal 2019.
However, for state-owned power plants and private power producers, it was not exactly a merry Christmas. State and private players operated at an abysmally low average PLF of 56.5 per cent, according to CRISIL.
“There needs to be some level-playing field as we are hit from all directions,” said an executive in a power plant. He was referring to lack of sufficient coal availability, coupled with piled up payments that are due from power distribution companies (discoms), lack of cheap financing options, insufficient Power Purchase Agreements (PPAs) and slowdown in economic activity.
In India, dues from discoms have touched Rs 80,000 crore or around $11 billion.
Coal, the necessary ingredient for generating conventional power was impacted significantly due to flooding at Coal India’s mines as a result of unseasonal rains.
Approximately 70 per cent of India’s power requirements are coal-based. Total conventional power generation, which is predominantly powered by coal was down 6 per cent on a year-on-year basis in the month of November, according to a recent report by brokerage firm Motilal Oswal.
This has impacted coal stocks.
At the end of November, coal stocks at power plants were 15 days when compared to 12 days in October, which reflected the lower thermal generation and demand. Better demand results in lower days that the coal needs to be stocked. Coal consumption by the power sector was down 17 per cent on a yearly basis to 46.8 mt in October.
Also read: Coal imports rise 4% to 161 MT in Apr-Nov
Power demand in the south was down by 4.3 per cent, west was down by 4.9 per cent, north was down by 3.2 per cent and east was down by 4.4 per cent.“ Industrial demand has been very low and we are yet to see a significant pick up,” said Rupesh Sankhe, Vice President, Elara Capital.
These factors have led to under-subscription in tenders, delay in project awards and project cancellations. For instance, in fiscal 2019, only a third of the tenders were awarded, which reflects ongoing concerns, noted CRISIL.
There is also the shift by power producers towards renewables. As a result of this, the private sector’s share in conventional energy capacity addition plunged to 22 per cent in 2019 fiscal, from 67 per cent in 2014 fiscal.