Coal news and updates

E-auction volume cut fails to hike power sector supplies

September 12: The directive by the Ministry of Coal to Coal India Ltd (CIL) in June this year to reduce the sale of coal through the e-auction route in order to increase supplies to power sector consumers appears to have failed to achieve the desired impact, according to an analysis by ICMW.

In fact, the supply of coal from CIL mines to the power sector has declined progressively between June and August after the directive came in, the analysis revealed.

The decline in supplies to power units came despite CIL, by adhering to the government directive, significantly reduced the sale of coal through e-auction.

The government had directed CIL to restrict its offering through the e-auction platform to 25 million tons in a year after it was found that several parts of India were facing severe power outages and a number of power plants in the country were facing lower coal stock positions.

The logic might have been aimed at redirecting the maximum quantity of coal towards the power sector, which is the biggest consumer of coal in the country (80%).

But it has been found that despite a drastic cut in the e-auction quantity, overall supplies to the power sector has not improved. Moreover, the number of power plants facing a critical coal stocks position of less than 7 days too has risen sharply.

“This calls for serious introspection,” an industry expert said.

Recently, Coal Minister Piyush Goyal said the reason for low coal stocks at power plants was the fact that CIL was supplying less coal to the sector, but it is mainly due to higher generation of coal-fired electricity on the back of higher demand.

In addition, lack of availability of additional hydro power due to the poor monsoon in the country also put pressure on coal-fired plants.

The cumulative impact was higher demand for coal-fired electricity, which put pressure on plants to operate at higher plant load factor (PLF) even as coal supplies remained as per plan or were stagnant, industry sources said.

The additional coal required to operate at higher PLF was supposed to be arranged by imports, but that did not happen and as such there is shortage of coal at most of the power plants in the country, they said.

Meanwhile, according to the analysis by ICMW, supply of coal to the power sector by CIL in August stood at 28.7 million tons (mt), down from 28.94 mt in July. In fact, coal supplies to the power sector by CIL stood at 29.10 mt in June and a high of 30.15 mt in May 2014.

The data compiled by ICMW revealed that there is in fact a decline in coal supplies to the power sector by 1.45 mt in August as compared to May despite reduction in e-auction volumes from a high of 5.14 mt in the month of May to only 0.831 mt in August.

“This shows that a cut in e-auction volumes will not necessarily lead to increase in supplies to the power plant,” said an official from a power plant, which depends largely on e-auctions to procure coal.

Explaining the reason, the official said nearly 80% of coal, which is offered under the spot e-auction route, is supposed to be delivered through road (trucks), which is generally purchased by consumers which have plants in nearby locations from where the coal is offered.

But for the big power plants it is not feasible to lift coal by trucks because their transportation cost goes up significantly if they transport the material by any mode other than the railways, he added.

“In addition, coal companies generally offer for e-auction coal from only those mines, which do not have railway sidings and in such a scenario, the coal from such mines is difficult to be lifted by big power plants,” said a second official.

Meanwhile, the initiative of CIL that allowed power plants to lift coal from mines by making their own transportation arrangement appears not to have progressed much because of various reasons.

The following table provides details of month-wise coal supplies by CIL to the power sector and the quantity of coal sold through e-auction:

Source: CEA, ICMW and CIL