The problem of coal shortage during the monsoon months is not uncommon. This has happened in the past. This time two things have made it different. One is the sudden increase in thermal power consumption. From the 5-6 percent growth we’ve been managing over the past several years, we suddenly see a growth of 9-10 percent — 17-18 percent over the same period of 2019 — so it’s a bit of a wedge. Second, which is perhaps a bigger problem, is that about 20-25 percent of the coal used is imported, and prices have suddenly come down to the ceiling. This was mainly due to imports by China, and the world would have a fever if China sneezed. Prices went up and imports that were to come came to a standstill [to India]… This increased the demand for domestic coal and the demand-supply gap.
Also, the roots of the crisis are three-four years old. A kind of complacency had begun, with thermal power plants seeing PLF (Plant Load Factor: Ratio of Energy Produced by Generating Capacity) as low as 52, 53, 54 percent. He was also finding it difficult to pay off his debt. But he had no choice, because Akshay [energy] Priority given in lifting… Power Station Merit Orders were dispatched [in which] An absolutely excellent, highly rated power station in the distance simply cannot find its place because of the transportation cost. And Indian transportation costs, especially railway tariffs, are completely out of the system and among the highest in the world… Thermal power circuits have continued to operate at low PLFs… as coal is being pushed over them. Is. [and] They do not seem eager to pay the coal on time. The stock they had to keep, they left it to Coal India…
On the Coal India side, down 1 per cent for two consecutive years, the stock went up by 25 million tonnes to a record high… In a situation like that, Coal India would neither implement cash-and-carry Nor to bring understanding to the whole system… When a shock occurs, it takes time for a satisfied system to react. This is largely the reason for what happened. But luckily, the bad times are behind us, the monsoon is over. We are in good months. And the coming 4-5 months are going to be good.
On preventing other similar crises in the future:
CEA (Central Electricity Authority) is determining the number of days stock; The CEA may have a regulatory mechanism to see that the particular stock is maintained.
(Thermal) Gencos should pay for the coal on time; It is basically a cash-and-carry system. Just because coal is readily available, it’s being imposed on you [even though] You don’t need that coal, it’s not a very friendly thing. Discoms (distribution companies) should be able to realize the market price for whatever electricity they sell – and those who need subsidies should be subsidized from the state budget. Until you move to such a model, there will be problems in some form or the other.
On production stagnation faced by Coal India:
The demand for coal for power stations is determined very critically by one factor, and that is the PLF. The average PLF of the country is low at 52-53 per cent for the last three years and no sensible effort has been made to improve it, even though doing so will have many positive consequences.
Number one, it leads to financial stability to repay the loan and keep some margin etc. Second, the incremental cost you are bearing is just the variable cost of coal; It is the cheapest source of electricity, and by not increasing the PLF, we are not exploiting the cheapest source. And it should be able to really address the issue of affordability, which is important, because we are a country with a low per capita income.
We have seen 79-80 per cent PLF in 2007 and 2008. Now it has fallen; We have created capabilities that we are not using. As a result, we are actually depriving ourselves of low-cost electricity. We should take the PLF of existing power plants as high as possible.
Coal companies have to build enough additional capacity in the system [so] They can move some things… for example, when demand was low, in fact they did, and that’s why they’ve been able to manage it. [situation]… they shipped advance, overburdened, exposed a certain amount of coal, did not produce, but they could fall back on that coal during this crisis … as a result, they received an off-take development About 19 percent over the previous year, taken from stock as well as production. There has been an additional production of 15-16 million tonnes in this period as compared to last year…
On diversifying into sectors such as solar energy and fertilisers:
If demand from the power sector isn’t going to come in – this year is different, but it was the case in the last three years – and the company has to grow, where does that coal go?
To use that coal effectively, coal gasification, an alternative use of coal, could be one way. We have always used coal as a fuel for electricity, we have never considered the feedstock character of coal, that coal can also be a feedstock for the production of chemicals, fertilizers, ammonia… very tightly married [but] Now the marriage is falling apart, Shakti has other partners, renewable energy is coming. So, coal has an opportunity, the other way around. I think this is the right thing to do for Coal India. But at the same time… chemicals from coal, ammonia from coal and fertilizers from ammonia are common… China does, South Africa does, and that’s a good thing to do because all these things are dependent on imports…
Beyond that, I’d say solar is for everyone. Anyone can get into solar, and solar certainly complements energy. coal will eventually be phased out, [but] The company has to continue…, so [it] The strategy will be to diversify into different areas that are not unrelated, but make sense given where you have returns, where you can build core competence…
On the impact of higher dividend payments to the government:
If there is no demand, building capacity becomes a sunk cost, at least until demand recovers. Coal India is a reasonably debt-free company and has enormous debt-contracting capacity if it wants to do something really fast, but during that period, what do you do with the resources you generate? The largest shareholder is the government; [when] The government takes a call that it wants to use this money for something, you can’t always say, but if you have a clear plan to invest money in your projects, then definitely you should take it to the government. should keep …
I don’t think that CIL has really suffered a huge loss because of the withdrawal. But at the same time, the dividend payment should be within the norms of company law. It cannot exceed the distributable profit for the year, should the payout ratio be reasonable. If you are giving a target of 1 billion to the company [tonnes of coal production] You leave some money even if the company doesn’t have a clear plan for that…
On carbon capture to make coal use more palatable:
The best that Coal India can do is to help or support low-emission power generation. What he needs to do for that is wash his coal, and today we don’t have the old-fashioned washeries where a huge amount of water was consumed. Today we have western-grade washeries where water consumption is only incremental. The initial water you put in and then you just need some incremental top-ups… they are power-efficient, water-efficient, yield-efficient, so we should try to promote these technologies… We have a lot more no good coal [and] With open-cast mining, coal gets worse, so washing is the only solution.
On the future of coal in India, as the world pushes for renewable energy:
If India is to develop it has to have more power, it has to generate that power, and that is not possible without relying on coal. Must be coal, especially for base load. Now yesterday, let’s say that storage costs have come down (a lot). And Solar Plus Storage is the cheapest. How much of the total requirement of solar energy can be met even in that case, even if the share increases, the demand for electricity also increases rapidly? If you ask these questions I am sure you will come to the conclusion that most of this will have to be borne by coal, and that is why coal based electricity in this country will have to continue for some time.
Yes, it is important to see that the carbon footprint is minimized… Washing can be one way, you use less amount of coal, you do some technological innovation at the user end and see that the requirement is reduced … you make more sustainable use of coal Produce coal in a more sustainable way, move coal in a more sustainable way. These are things you can certainly do, but you can’t shove coal in the next 25, 30, 40 years.
Written by Mehr Gill