A 10th Of Thermal Capacity Still Vulnerable To Outage: CRISIL

A tenth of thermal capacity still vulnerable to outage despite temporary easing of power demand, CRISIL has stated.

About 10% of the 209 GW (~20 GW) capacity of coal-based thermal power generation companies (gencos) in India remains vulnerable to outage amid surging demand for coal. Despite the recent dip in demand (10% over October 16 and 17) due to heavy rains, shortage of coal persists with inventory at ~5 days for these power plants.

Over half of these capacities do not have fuel supply agreements (FSAs), which increases their reliance on coal, either through imports or through e-auction where prices remain elevated. The scarcity and higher prices of coal may force these capacities to shut down for a few days as their operating cost could outweigh revenue, a CRISIL analysis indicates.

"Even though domestic coal supply1 in the second quarter this fiscal is up 16% compared with the corresponding pre-pandemic period of fiscal 2020, part of it is to substitute non-coking coal imports, which have fallen more than 20%, resulting in overall coal supply growing at around 8% and, consequently, coal stock at the plants depleting," the ratings agency has said.

Says Ankit Hakhu, Director, CRISIL Ratings, "We expect high global coal prices to make imports dear and domestic e-auction premiums to remain elevated over the next few months, till supplies stabilise. In this milieu, ~20 GW private capacities (out of 209 GW coal-based capacities) will be the most vulnerable as these depend heavily on the open market or imports for coal, and most have committed tariffs for the power sold to utilities. Therefore, if these gencos continue operations at these elevated current coal prices, it may lead to operating losses and thus these capacities may prefer to shut down till coal prices cool."

Says Rohan Kulshrestha, Associate Director, CRISIL Ratings, "Thermal PLFs have expanded by 400 bps to 57% in the second quarter of this fiscal from 53% in the corresponding quarter of fiscal 2020 and are expected to remain high at ~60% for the full fiscal (vs 56% in fiscal 2020). As a result, the pressure on coal demand will also remain high. While coal availability for plants having FSA will be just about adequate for their current generation, gencos are unlikely to be in a position to ramp up inventory, which is expected to remain in single-digit days."