India directs states to expedite coal imports amid no respite from power crisis

India's power ministry has asked states to place orders for importing coal so that the fuel could reach power plants from this month, as increasing coal shortage has led to an electricity crisis in various parts of the country.

Despite soaring summer demand and lack of optimum power supply, states including Haryana, Uttar Pradesh, West Bengal, Odisha and Jharkhand have not yet issued any tender or taken any significant actions for the import of coal, the ministry said in a statement May 5. However, Tamil Nadu and Maharashtra have already placed import orders, while Punjab and Gujarat are in the advanced stages of finalizing tenders.

According to people aware of the developments, power plants run by state governments have been asked to import 21.8 million mt coal, while private power plants are expected to import 15.9 million mt.

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Meanwhile, in a rare move, the government also directed all imported coal-based projects to generate power at full capacity, invoking section 11 of the Electricity Act, 2003, which mandates power plants to operate according to the government directions "in extraordinary circumstances." The order, reviewed by S&P Global Commodity Insights, will be valid till the end of October 2022.

As the power purchase agreements of many imported coal-based plants do not allow them to charge customers the prices, which would be commensurate with the current high global prices of thermal coal, the tariffs of such projects will be worked out by a committee comprising representatives from the federal power ministry, the Central Electricity Authority and the Central Electricity Regulatory Commission, the order said.

Out of the 204.9 GW of installed coal-fired power generation capacity in India, around 17.6 GW is designed specifically to run on imported coal. Other power plants import the fuel for blending with domestic coal.

Government sources said that about 4 GW imported coal-based generation capacity was in operation in January 2022, which has now been increased to 10 GW.

Low stockpile, high prices hamper power supply

Thermal coal imports by power utilities in India fell 43% on the year to 24.16 million mt during April 2021-February 2022, according to the latest available data from the Central Electricity Authority.

India has largely remained on the sidelines amid elevated global coal prices due to the Russia-Ukraine conflict, which has disrupted trade flows and crippled supply amid additional demand from Europe.

According to S&P Global data, the price of Indonesian 4,200 kcal/kg GAR coal increased from $79.05/mt FOB Feb. 24, 2021, to $91.95/mt May 5, 2022. During the same period, the price of South African 5,500 kcal/kg NAR rose from $231.9/mt FOB to $269.5/mt, while Australian 5,500 kcal/kg NAR price with 23% ash content increased from $159.25/mt FOB to $196.95/mt FOB.

The country has been witnessing a stockpile crunch, leading to power outages in several states as inventories stood at 21.52 million mt May 4, sufficient for less than eight days of coal burn, according to data from CEA. The levels have been close to October 2021 when India witnessed a record power shortage, with stockpiles dwindling to just four days' worth of coal after production and supply disruptions in the July-September monsoon period.

India's total coal production in April rose 29.09% on the year to 66.15 million mt, according to a government statement May 3. State-run Coal India Ltd. had said April 19 that despite increasing supplies, "the escalating power demand, driven up by the post-pandemic economic buoyancy and hotter-than-normal summer, seems to dwarf the upsurge in supplies."