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Coal India prepares for the great Indian summer

In preparation for a summer that will be much hotter than the previous one, Coal India Ltd. (CIL), the nation’s largest coal miner and supplier, is operating at full capacity. According to a corporate spokesperson, the company is scaling up production, holding more coal at the pitheads, and giving power companies instructions to store more inventory on their end. Last April, India’s peak power demand reached an all-time high of 216 gigawatts (GW). In April, the electricity ministry projects that this will reach a new high of 229 GW, an increase of 6%.

Due to a lack of coal needed to light up power units to satisfy the additional needs, the increase in power demand last year left many Indian states without electricity for hours. The supply of coal was disrupted by a number of issues, including decreased output, a lack of rakes to transport the fuel, and soaring debts of state-run power producing and distribution enterprises.

Manufacturing and supply

A senior official stated, “CIL aims to maintain the pace of supplies supported by greater output in Q1 FY24.” By the end of FY23, according to CIL’s own scheduled timetable, yearly demand from the power industry should surpass 585 million tonne (MT), up from the anticipated 565 MT. 610 MT is the anticipated increase for the entire FY24. CIL contributed 534 MT of coal to the electricity sector in the fiscal year that ended in February 2023, a rise of 9.4% from the previous year.

The official stated that “coal demand would be greater than the 153 MT that CIL delivered to the power industry during Q1 FY23,” adding that it is challenging to anticipate demand more precisely. CIL intends to work at full capacity to improve output in the June 2023 quarter, which falls during the busiest summer, with the goal of increasing supplies to the power sector by 6% compared to the same quarter last year. The official stated that the activation of new infrastructure projects had given rise to confidence in increasing coal supplies to the power sector.

The official added, “Coal India is in continual touch with Indian Railways for greater rail availability to meet increasing demand,” saying CIL is working to develop additional stock of 68 MT at its mines by the end of March.

Message to Gencos

CIL has also written to companies that make electricity (gencos) to try to get them to buy more coal before the peak season. As of the first of March, power plants in India (those connected to CIL) had a total coal stock of 29.59 MT, of which 1.63 MT was imported coal. This equals an inventory of coal sufficient for 14 days.

Payables are still a concern.

The CIL official admitted the increase in receivables from state-run power companies is a cause for concern, pointing out that payables have increased since the start of FY23 up until now. The amount due for coal sales as of March 31, 2022, was Rs 13,792.21 crore. In May 2022, the power ministry introduced a scheme to help state distribution companies (discoms) clear dues worth more than Rs 1.1 lakh crore. The scheme was proposed after pending payments emerged as a critical issue during last summer’s power shortage. The ministry proposed a scheme to allow discoms flexibility in paying pending dues to gencos by staggering payment in up to 48 installments.

State utilities pay gencos for the power they sell to the state utilities, and gencos pay CIL for the coal they buy. The CIL official said its subsidiaries are “vigorously following up with different generation companies to bring down the same (payments due)”. He added that there is no risk on the receivables as the entities are government-owned. “State discoms pay gencos to supply them with power, and gencos pay CIL to supply them with coal. According to the CIL representative, its subsidiaries are “vigorously pursuing up with different generation businesses to bring down the same (payments due)”. As the companies are owned by the government, he continued, there is no risk associated with the receivables.

Tavishi Bhalla
Tavishi Bhalla
Tavishi bhalla is a student of bachelor's of science in Institute of Home Economic. She has strong communication and content writing skills. Tavishi is currently working as a journalist at BusinessHeadline.in and can be contacted tavishi@businessheadline.in.
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