Crisis seems to be looming large for coal-fired power plants of the country. The sudden escalation of prices of imported coal is putting them on the back foot.
Most of the coastal power plants are imported coal-based ones and a large number of them now are said to be in severe crisis on the face of steep increases in fuel prices. Adani Power, Essar Power, JSW Energy and Tata Power are reportedly some among them.
Some of these plants are already hit by low demand for power from the distribution companies.
Adani and Essar power plants recently had reduced supplies to Gujarat Urja Vikas Nigam (GUVNL). The move is expected to add on to their already worse financial situations. Ultra mega power projects of Adani Power and Tata Power have been in financial woes for last some years on account of their low-tariff power purchase agreement with states.
Majority of coal traders from India do business with Indonesia as after Coal India (CIL) the combination of price and quality best suit them that. While Australian coal always remains a pricey affair for Indian buyers, coal from South Africa contains higher ash percentage.
But with Indonesian coal prices now shooting substantially up, especially for higher graders, Indian buyers are facing a tough time.
“Indonesian coal prices are constantly rising in the near to medium term and the average selling price for coal is set to increase by at least 5% during 2018,” a Mumbai-based trader said.
Strong Chinese demand, supply tightness and unseasonal rains in Indonesia are factors which have contributed to the significant price rise. Prices for 5,900 kcal/kg GAR has increased by almost 10% since the beginning of January last year and it is now being sold at $78.75/t FOB.
Many Indian entities prefer buying 4,200 kcal/kg GAR coal and the price for this when the trader last placed his order in this February was $50/t FOB – around 35% hike over a period of 14 months.
The reason for this hike is said to have emanated from Indonesian government’s decision to cap the price of the coal for the domestic use.
Prices of higher grade imported coal in the Indian market are currently hovering around $100/t. This is an increase of over 50% as against last year prices.
“If the shortage of availability of rail rakes is not met immediately the situation will not get solved and there will be no change in the market situation,” a trader from Chennai told Indoen
“It is not winter where we can expect some price crash but hardcore summer months which are streaming in when power is required the most,” he added.
Although Indian coal with its high ash content is not preferable but given the current scenario it can be a handy one in a market which is price sensitive. Many Indian buyers are anticipating lower prices but are shocked at the recent developments.
While some are holding back their decision to purchase more, some are going ahead keeping in view the summer months. Many power plants are already in critical and super critical stage.
Coal stock report of the Central Electricity Authority (CEA) reveals that the number of critical plants has gone up significantly this year. On April 8, when the report was last published, the total number of critical plants was 25, against 1 the same day last year. CEA monitors 114 plants.
Steel sector which sources most of its coal from international marketplaces is also worried over the increase in prices of coal. Steel market which otherwise was facing lower demand will now see their profit margins dipping due to the coal price increases.
Logistics limitations have curtailed steady supply of domestic coal from CIL and analysts say this will push consumers to buy costly foreign coal to meet their summer demands.
Coal quality of CIL is another issue as most of it is low calorific stuff.
In a relative development aimed at stemming over this situation, the government has asked National Thermal Power Corporation (NTPC) and Bharat Heavy Electricals (BHEL) to devise a mechanism to recalibrate boilers to suit Indian coal specifications.
Union coal and railway minister Piyush Goyal attending an ASSOCHAM event last week said: “Many turbines in India cannot take beyond a certain percentage of domestic coal as they have been designed on imported coal (specifications), I am glad that NTPC and BHEL are both working to recalibrate those plants.”
He said the government was willing to make further investments if needed for the project as it is worth the saving for the nation as a whole.
A BHEL source told Indoen that R&D is underway to develop advanced ultra supercritical technology boilers that will work totally on low calorific value indigenous coal.
