The agency’s estimates coincide with government data showing a 29% jump in the production of Coal India Ltd, which accounts for 80% of the fuel supplied to power plants, and coal-fired generation rising 9% in April from the year-ago period on the back of an 18% increase in fuel despatch.
But the Icra note said the ministry’s directives to states to import coal for blending and imported coal-based power plants to run on full capacity will push up India’s dependence on imported coal to about 13% in 2022-23 from 4% in the previous fiscal.
The increased proportion of imported coal in the fuel used for generation will also raise the cost of supply for discoms roughly 5%, it said.
The agency’s estimates appear to be guided by two factors. One, the high cost of imported coal, hovering around $110 per tonne for fuel with GCV (gross calorific value) of 4200 kilocalories per kg. Two, doubts over whether the higher cost of power will be passed through in full to avoid a public backlash.
“With a sharp increase in coal price levels internationally over the past 14 months, the variable cost of generation for imported coal-based power projects is estimated to have increased by more than Rs. 3 per unit between March 2021 and May 2022,” the note said.
The note maintained a negative outlook for government discoms due to their continued weak financial position as a result of inadequate tariffs, high line losses and inadequate subsidy dependence. But it said the credit profile of private discoms are supported by operational strengths arising from demographic profile, operational efficiencies, tariff adequacy as well as sponsor strengths, respectively.
Icra senior vice-president Girishkumar Kadam said all-India energy demand in April and May (till date) grew by 11.5% and 17.6% year-on-year, respectively, while tight domestic coal supply position and elevated international coal price levels continued to affect the energy generation levels.
The ministry had in December asked states and private generators to import coal for blending as demand started rising sharply and fuel stocks ran low at power plants.
Last week, the ministry invoked an emergency provision in the Electricity Act to ask imported coal-based plants to run at full capacity and sell power on the energy exchanges if states with whom they have long-term PPAs (power purchase agreement agreements) do not buy power.
Since these PPAs do not have the pass-through provision for any increase in fuel cost, the ministry has asked a committee to work out a tariff for now, factoring in the prevailing coal prices. The directive to the imported coal-based plants are valid till October 31.
The measures were initiated as reports of widespread blackouts in states flowed in amid low fuel inventories at power plants because of inadequate replenishments, essentially because of logistics issues. But even though coal despatch has risen to 400 rakes per day, against a normative requirement of 24 days, the average fuel stock at power plants stood at 8 days as on May 7 against 9 days as on November 30, an improvement over 4 days as of September 30, 2021.