India’s power plants imported more thermal coal on a monthly basis in August 2023 in anticipation of the shortage in supply of the critical commodity from domestic sources, particularly as the supply deficit is expected to stand at around 7 million tonnes (mt) in H2 FY24.

According to energy intelligence firm Kpler, India’s thermal coal imports rose 8.5 per cent m-o-m to 12.30 mt last month. However, on an annual basis, inbound shipments were lower by 17 per cent.

The growth in shipments during August comes after two consecutive months of decline.

During the month, power demand hovered above 200 gigawatts (GW) and touched the highest peak demand of 236.6 GW, which is around 21 per cent higher than the demand last year.

Overall coal stocks at mines, domestic coal-based (DCB) plants, and in transit stood at 86 mt on August 31.

Tight domestic supplies

Kpler Lead Major Dry Bulks Analyst, Alexis Ellender, told businessline, “The combination of stronger demand and a tightening of domestic supply supported Indian thermal coal import demand in August, which edged higher m-o-m.”

The weakening of monsoon conditions boosted power demand while also reducing hydropower generation. Government data shows a 13 per cent rise in total power generation in August, even as hydropower generation dropped by 6 per cent, he added.

“This was achieved through ramping up of thermal power generation plus a smaller (in absolute terms) increase in nuclear power. At the same time, domestic coal supply is in a period of seasonal weakness. Production in August was a ten-month low of 68.37 mt, although still higher Y-o-Y,” Ellender explained.

The Power Ministry has pointed out that, against a requirement of 404 mt for H2 FY24, domestic availability of only 397 mt is possible.

Higher manufacturing activity

Kpler data shows that metallurgical coal imports rose 10.54 per cent Y-o-Y to 5.56 mt in August, mirroring the strong momentum in crude steel production and the manufacturing sector. On a M-o-M basis, imports were down 13.26 per cent last month.

“Further robust growth in crude steel output, preliminary data indicates annual expansion of around 13 per cent in August, supported metallurgical coal demand. I would also note the strength of India’s manufacturing Purchasing Managers’ Index (PMI), which hit a three-month high of 58.6 last month,” Ellender said.

The seasonally adjusted S&P Global India Manufacturing PMI rose to 58.6 in August as new orders and output increased at the quickest rates in nearly three years during August. Firms geared up to handle rising demand by scaling up buying levels and rebuilding their input stocks at the second-strongest pace in 18 and a-half years of data collection.

Power demand

Earlier this month, the Power Ministry directed DCB plants to import 4 per cent coal by weight till March 2024, as the gap between consumption and receipt at such units stood at around 6.3 million tonnes in August, the highest in FY24 and calendar year so far.

“It has been noted that, despite an increase in domestic coal supply during Q1 FY24, it fell short of meeting the requirement during August. The gap between coal consumption at DCB plans and receipt of domestic coal has been about 2 lakh tonnes per day. The gap was partly made up of imports, without which coal stocks would have declined to critical levels, the ministry added.

In April-June 2023, power demand grew 7.8 per cent Y-o-Y. The demand in FY23 was 6.3 per cent higher compared to FY22.