India asks utilities to import coal amid short supply as demand spikes
India has urged utilities to import coal as coal-fired electricity generation surged in Asia’s third largest economy after an easing of coronavirus-related curbs, with several power plants on the verge of running out of fuel.
India is the second largest importer of coal despite having the world’s fourth largest reserves, and coal powers over 70% of the country’s electricity demand. Electricity generation makes up three-fourths of India’s coal consumption.
“Thermal power plants, which may import coal for blending, may explore (ways) to enhance imports of coal to tide over the current crisis,” the federal power ministry said in an Aug. 30 notice seen by Reuters.
Overall electricity generation rose 16.1% in August, while coal-fired power output rose 23.7% from a year earlier, a Reuters analysis of daily load despatch data by federal grid regulator POSOCO showed.
Data from the Central Electricity Authority showed over half of the 135 coal-fired power plants had less than a week’s supply of coal left, of which 50 plants had fewer than three days of coal left. Six plants had run out of coal. read more
India mainly imports from Indonesia, Australia and South Africa. The government has been seeking to cut imports.
India has also asked Coal India (COAL.NS) to prioritize supplies to thermal power plants with low stock and dispatch fuel from mines with abundant inventory to address the shortage.
Coal supply by the state-run miner, which accounts for over 80% of India’s coal output, rose 9.5% in August compared with last year, but was down 3.8% compared with July.
RISE IN COAL USE
In the first eight months of 2021, coal-fired electricity generation jumped 19.3%, faster than the 14.5% growth in renewable energy generation, POSOCO data showed.
The share of coal-fired generation in the period rose to 72.9%, in line with 2019 levels but above the 69.2% in the same period of 2020. Overall power use tumbled in the first half of 2020 amid coronavirus lockdowns but surged after restrictions were eased.
A power ministry official said the installation of new renewable power sources had been slower than expected, at a time when power demand had risen more 13%.
Trading volumes in India Energy Exchange (IEX) rose 74% to a monthly record in August.
“High cost of imported coal and LNG as well as lower wind power generation led to the increase in the electricity prices,” IEX said in a statement.
LNG AND PETCOKE
Coal imports by utilities rose 3.4% in the June quarter, while LNG imports fell by a fourth and petcoke imports fell by a third, government data showed.
Traders say lower shipments of LNG by utilities and petcoke were driven mainly by higher prices, further pushing up coal imports.
Vasudev Pamnani, director of consultancy Lavi Coal, said he expected imports to return to pre-pandemic levels by the end of the year.
“Absence of new investment in coal mining and closure of many mines around the world have pushed prices up,” Pamnani said.
However, higher prices could weigh on Indian imports of coal.
“In the next few months, elevated prices of foreign-origin coal and petcoke is likely to push cement companies to buy petcoke from domestic refiners,” Kirit C Gandhi, joint president at Indian cement firm Shree Cement said.
Source: Reuters (Reporting by Sudarshan Varadhan; Editing by Edmund Blair, Bernadette Baum and Mark Potter)