KOLKATA (miningweekly.com) – A shortage of coal in the domestic market has significantly reduced pithead stocks of Coal India Limited (CIL) and has forced the miner to regulate dry fuel supplies to nonpower consumers across the country.
Rising plant load factors (PLFs) of thermal power plants has had a salutary impact on CIL’s pithead stocks, which have been lowered from 68-million tons to below 40-million tons over the past four months.
While the supply side tightening may have a positive impact on reducing the carrying costs of the miner, the reversal of two years of surplus is a cause for concern in the medium term, against the backdrop of CIL’s inability to ramp up production to meet the rapidly changing market dynamics.
Explaining the short-term saving grace of high pithead stocks, a company official said that from April to August, CIL produced 193-million tons, which was lower than the internal target set. However, the miner was able to push sales during the period to 225-million tons, largely helped by the stocks it was carrying.
He said that going forward, with pithead stock availability reducing, CIL had no option but to regulate coal supplies to nonpower industries and had set up a so-called control room to monitor and provide emergency supplies to thermal power plants with a critical level of coal stocks.
Data from the Central Electricity Authority (CEA) shows that in August 2017, two thermal power plants had no coal stock, five plants had only a day’s requirement, eight plants had two days’ of stock and 13 plants had three days’ stocks. The CEA categorises thermal power plants with less than a week’s supplies as “critical” and those with four days or less as “super critical”.
According to CEA, during 2016/17, thermal power plants' coal stocks averaged 25 days of consumption, which is now down to just 11 days.
The current shortage of coal is expected to be aggravated in the coming months with thermal power plants steadily increasing their PLFs and resultant coal consumption.
Data from the Power Ministry shows that the average PLF of thermal power plants has increased to 58%, the highest in the last three years, up from 51% in 2016/17.
CIL, for its part, claims that thermal power plants are largely to blame for creating a shortage of fuel in the market. The miner has said that lower coal offtake at a time of low electricity demand and bunching up of offtake orders at a time of rising electricity demand skews the miner’s supply management.
CIL has conveyed to power plants that instead of banking on coal miners to bear the burden of stockpiling, power companies also needed to stockpile dry fuel when electricity demand was low and not rely on the minimum coal inventory that had kept carrying costs low at the plant level.