Centre and States have agreed on a formula to import 10 per cent of coal, or a little over 21.60 million tonnes (mt), for blending as stocks at domestic coal-based (DCB) power plants dip below eight days amid indications that power consumption will surpass last July’s record of 200 gigawatts (GW).

Last week, Power Ministry and 11 States held a high-level meeting, chaired by Power Minister RK Singh, where it was decided that these States will import 10 per cent coal for blending to reduce pressure on DCB plants and mining PSUs for generating more power from domestic supplies, sources said.

Higher imports for blending

The plan is to allow states to import coal, even at higher costs, which will be passed on to the end-consumer till December 2022. Most of the quantity is expected to be delivered between May and July this year. A review of the situation will be conducted in the last week of April.

Accordingly, it was decided that these 11 States will import around 21.64 mt of coal to blend with domestic supplies. Of this, Maharashtra will be importing around 10 mt, Uttar Pradesh 2.25 mt, Madhya Pradesh 1.95 mt, Tamil Nadu 1.5 mt, Gujarat one million tonne and Punjab 1.63 mt.

While Haryana will import around 5.22 lakh tonnes, Telangana, Andhra Pradesh, West Bengal and Rajasthan have been asked to submit their import plans.

A top government official said, “It has been mutually decided that States will import and higher costs will be allowed to pass through till December, if prices remain above pre-Covid levels. Centre and concerned States will approach the Central Electricity Regulatory Commission (CERC) and State commissions for getting the proposal approved. Gujarat’s mechanism of calculating the pass through tariff has been suggested as a benchmark for others.”

The idea is to not let imported coal based (ICB) plants run idle due to high import costs. Power Ministry has already issued directions to states for ensuring such plants produce electricity as per the power purchase agreements (PPAs).

Alarming supply situation

Sources said Centre and States were worried about continuous fall in stocks at DCBs, despite higher production and supply by Coal India (CIL). “Around 7,890 MW capacity at ICB plants is idle. If they come online, pressure on DCBs will reduce. Peak demand may hit 210 GW this month or next,” said a top government official.

For perspective, on April 20, the peak power demand met during the day was 197.28 GW and on the same day, peak shortage recorded was 7,681 megawatts (MW), among the highest for April. Similarly, coal-based generation stood at 3,432 million units (MU), but energy shortage was also among the highest for the month at 105.24 MU.

Coal stocks at DCB and ICB plants were at 7.9 and 8.9 days, respectively, with 86 DCB plants and 11 ICB plants having critical stocks.

Coal imports have been consistently heading south since FY20. In-bound shipments by power sector fell from 69.22 mt in FY20 to 45.47 mt in FY21. During April 2021-January 2022, imports further shrunk to 22.73 mt ( 39.01 mt).

Stretched coal supplies

Coal inventories held by power plants are declining consistently — from 8.3 days on April 14 to 7.9 days a week later on April 21 for DCB plants and from 9.6 days to 9.1 days for ICB plants during the same period.

Nomura, on April 19, said inventories remain tight at nine days’ worth of stock as of mid-April, up from around four days last October, but much lower than the average stock of 17 days held in April over the last five years. Electricity demand has shot up due to reopening and as India heads towards peak summer season, but supply has been disrupted due to reduced availability of railway rakes to transport coal. Lower coal imports at high prices are a deterrent, it added.