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Coal shortage problem faced by power producers might be abating, albeit temporarily
Electricity generation in May grew 5.68% from a year ago, the fastest pace in four months. It can be attributed to seasonal factors, but unlike earlier months, it was achieved over a similar growth rate of 5.9% in May 2012, according to data from the Central Electricity Authority (CEA). Whats more, it seems to indicate that the coal shortage problem faced by power producers might be abating, albeit temporarily.
While India has added some 20,000 megawatts (MW) of capacity in the last financial year, it couldnt produce, or import, enough coal to run these factories in an economically viable way. Thus, plant load factors, or capacity utilization, of thermal power plants fell to as low as 61.5% by August.
According to the CEA, shortage of coal was responsible for 12.25 billion units, or 11.5% of total generation loss in 2012-13. The biggest culprit was gas shortage, but that is another story.
That the coal shortage seems to be diminishing can be seen from a couple of statistics. One, the number of thermal power plants having coal stock of less than seven days has dropped to 19. This number was 32 in January and had climbed to as high as 49 units in October.
Secondly, plant load factors of coal-based power plants are hovering around 70-71% in recent months, despite the acceleration in capacity addition. Note that nearly half of last fiscals capacity addition of 20,000 MW happened in the January-March quarter. That plant load factors have held up despite that is a promising indicator.
This doesnt necessarily mean that the domestic coal supply has increased. The new found alacrity in tariff revisions by state electricity boards and allowing a fuel cost increase pass through meant that some power plants were able to import higher priced coal. In any case, international coal prices have crashed and, in a 30 May interview to Mint, Tata Power Co. Ltd said its average cost of coal import dropped to $72 per tonne in fiscal year 2013 from $98 per tonne in fiscal year 2012, although the depreciating rupee would have taken some sheen off that. In April alone, thermal coal imports jumped by nearly half from a year ago, reported Reuters.
To be sure, Coal India Ltds numbers have also improved. In April, its average daily rake loading was 201.5, up 11.4% from a year ago, reported The Hindu. The company is targeting a 6% increase in dispatches and an average daily rake loading of 212 this fiscal year.
However, the CEA estimates thermal capacity addition of 15,234 MW this fiscal, or about 11.6% of existing capacity. Thus, the happy situation may not continue since some of these projects have been bid for at highly competitive rates and may not be able to supply power from imported coal unless they are granted relief like Adani Power Ltd.
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