India asks imported-coal based plants to use full capacity till June 2024

India has extended the directive for all import-based coal power plants to run at full capacity until June 2024, from from October 2023 previously, to cope with higher power demand and inadequate domestic coal supply, the power ministry said Oct. 25.

In addition, domestic coal-based plants have been asked to blend at least 6% of imported coal into the fuel mix until March to help address the gap between domestic coal availability and consumption by the plants, which was at 12 million mt between Sept. 1 and Oct. 9. Previously the government had instructed all the domestic plants to blend 4% of imported coal until March 2024.

The move comes amid rising electricity demand and depleting coal inventories due to inadequate domestic production, with reduced hydro power generation exacerbating the issue.

Hydro-electricity generation in India dropped 11% on the year in the first half of the financial year April 2023-March 2024. Nearly 2 GW of hydro capacity is unavailable after a recent lake-burst in the state of Sikkim in northeast India caused severe floods, according to the statement.

Moreover, decreased hydro reservoir levels in many parts of the country have put more pressure on thermal plants to meet rising demand, it noted.

India's peak power demand in September was as high as 240.17 GW, compared to 200.35 GW in the corresponding month a year earlier, according to Central Electricity Authority data.

The development also comes at a time when the Asian thermal coal spot market is undergoing severe supply constraints, primarily due to uncertainty regarding the approval of revised output quota for Indonesian miners. Indonesian miners need approval from the government if they wish to alter their production plan from estimates given at the start of the year.

In recent weeks, coal prices have seen an uptick on elevated demand in China to replenish stocks for the upcoming winter along with rising demand in India.

Platts assessed India-delivered 5,500 kcal/kg NAR coal at $122.80/mt on Oct. 25, up from $118.45/mt at the beginning of October, data from S&P Global Commodity Insights showed.