Power Ministry’s ultimatum to States: Will cut domestic coal supply to state-run gencos if they delay imports

The ministry’s move came after it was forced to reverse its own policy to reduce coal imports in the wake of a major electricity crisis following a record rise in power demand due to heatwave

Sanjay JogUpdated: Wednesday, May 18, 2022, 11:42 PM IST
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Power Ministry’s warning to States: Will cut domestic coal supply to state-run gencos if they delay imports | Photo: Unsplash

The power ministry, which is struggling to bridge the gap between the surge in demand and the gap in supply, warned on Wednesday that it would cut domestic coal supply to state-run generation companies (gencos) that did not import coal for blending by June 15. “If blending with domestic coal is not started by June 15, 2022, then the domestic allocation of the concerned defaulter thermal power plants will be further reduced by 5%,” the power ministry said in its directive to the state-run gencos.

Accordingly, the revised allocation of domestic coal from July 2022 onwards will be conveyed. All gencos have been advised to ensure their power plants are adequately stocked for smooth operation until October this year,” said the ministry. “Keeping in view the likely less materialization of coal supply from domestic sources as compared with the requirement to meet power demand, domestic coal will be allocated proportionately to all gencos based on likely availability from June 1, 2022, and the balance requirement will need to be met from imported coal for blending purpose and the production target set in captive coal mines,” it added.

“Not much blending has taken place in the months of April and May 2022, the power plants (that have not yet started blending with imported coal) will ensure that they blend coal at the rate of 15% up to October 2022 and thereafter at the rate of 10% from November 2022 to March 2023,” the ministry said.

Union power minister’s letter to CMs

Union Power Minister RK Singh has urged the chief ministers to ask the gencos to take immediate steps to import coal for blending in order to meet their requirement during monsoon season. The minister, in separate letters to Haryana, Uttar Pradesh, Karnataka and West Bengal, has expressed concern that the tender process for coal import has either not been started or completed in these states.

Singh further asked state gencos to expeditiously lift the entire quantity of coal offered under road-cum-railway (RCR) mode, to build coal stock. He stressed that in case of failure on either account, it would not be possible to provide additional domestic coal to make up the shortfall.

According to the minister, if the RCR allocation were not lifted, it would be allocated to other needy state gencos and if the current state of affairs were to continue, it was likely to lead to shortage of coal in states during the monsoon, adversely affecting power supply in the states.

Singh highlighted that due to the increase in demand and consumption of electricity, the share of coal-based generation has increased and the total coal consumption by power plants has also increased. He informed that materialization of domestic coal was only about 88 per cent of total requirements.

In order to ensure the minimum required coal stock in power plants before the onset of the monsoon, the minister has directed that both thermal power plants owned by state gencos and independent power producers (IPPs) had to use all sources to maintain adequate coal stocks.

The ministry’s move comes after it was forced to reverse its own policy to reduce coal imports in the wake of a major electricity crisis, following a record rise in demand for power because of heatwaves. Central and state gencos must import 10 per cent of their coal requirements for blending with domestic coal, the ministry has said. The ministry has set a target of import of 10% of coal needs by the central and state generation companies of their coal requirement for blending with domestic coal.

The ministry had earlier directed that imported coal-based plants run and the states import coal for blending, as in previous years. As reported by The Free Press Journal, the ministry had issued directions under section 11 of the Electricity Act, which states that all imported coal-based plants start running and most of them have started running.

“However, the import of coal by states for blending is not satisfactory. In 2018-19, a total of 21.4 million tonnes (MTs) of coal were imported for blending. In 2019-20, the total import for blending was 23.8 MTs, whereas in 2021-22, it was only 8.3 MTs. This is the cause of the stress in the availability of coal,” said the ministry.

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