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243 viewsAll GS PapersGS Paper 3
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Approach:

  1. Introduction.
  2. Discuss about India’s coal production.
  3. Elaborate on the state of ICB plants.
  4. Highlight the challenges.
  5. Way forward.

India has not been immune to these developments and is suffering gaps in power supply. A number of states across the country are resorting to scheduled ‘load-shedding’ to meet the increased power demand associated with the revival of the economy and an abnormal surge in temperatures. The continuous increase in demand for electricity post-lockdown has placed massive pressure on the power generation plants, most of which are operating on coal.

India’s Coal conundrum: Despite Coal India Limited achieving its highest coal production of 777.31 MT (Provisional) in FY 2021-22, the year 2022-23 witnessed disruption in coal supply to the power plants due to lack of availability of required rakes from the Indian Railways and shortages in explosives required for the blasting of mines to extract coal. It came at a time when India’s power demand reached an all-time high of over 210 Gigawatts (GW) (around 1,500 hours) on 9 June 2022, and with no end in sight to the heatwaves.

Imported Coal based plants in India: After 1991, the Indian government began liberalising the power sector and undertook policy reforms to attract private investment. Since then, a number of private coal-based power plants have come into existence in various parts of the country. One such group of coal-based plants comprises those operating entirely on imported coal. At present, the cumulative capacity of these imported-coal-based (or ICB) plants is around 17,255 megawatts (MW), or more than 8 percent of the country’s total coal-based power plant capacity of 210,699.50 MW. Mundra Ultra Mega Thermal Power Plant in Gujarat having the highest installed capacity (4,000 MW), followed by Mundra TPS-I&II (2,640 MW), and Mundra TPS-III (1,980 MW), also in Gujarat.

Of the total capacity of ICB plants, most of them run at less than their full capacity. The average coal stock, based on the normative requirement measured at 85 percent Plant Load Factor (PLF) for many is less than the national average of 39 percent. A low PLF for a power plant indicates that it is not being used to its optimal capacity, resulting in an increase in the per-unit cost of the power produced. Moreover, eight plants with combined capacity of more than 7,000 MW are in the ‘critical’ category, owing to their low coal stock.

Role of ICBs: Power supply supplemented through these ICB plants helps optimise the railways rakes and divert them to plants having low coal stocks, especially in the hinterlands. ICB plants also fill the shortages during the monsoon periods, when coal mining operations are disrupted and transportation of coal becomes difficult.

Challenges Faced by ICB Plants:

  • ICB power plants are facing chronic supply-side bottlenecks and financial constraints, thereby hindering their ability to operate at optimum capacity. Indeed, the situation is precarious as many ICB plants are finding it difficult to finance even their working capital needs, as investment in general in the coal-based power generation is becoming scarce.
  • Notably, significant proportions of funding for coal-based plants in India come from government-owned non-banking finance companies such as the Power Finance Corporation (PFC), Rural Electrification Corporation (REC), and Life Insurance Corporation (LIC).
  • One of the reasons for excess pressure on coal-based plants, are non-operational gas-based plants.
  • It also worth mentioning that diesel generator (DG) sets—which are costlier and polluting—have long been used as backup in power outages. The cost of generation for a DG set is far higher compared to that of ICB plants. Moreover, imported diesel puts greater burden on the country’s trade balance than coal.

Way Forward: To deal with the volatility in global coal prices, ICB power plants must disclose their future coal needs in consultation with the Ministry of Power so that planning can be done and possible causes of volatility can be addressed in advance. On the policy front, ICB plants should diversify their sources of imported coal to manage volatility.

India must address the working capital requirement of its ICB plants.  The rising costs of inputs faced by ICB plants, on account of high international coal prices, are putting extreme pressure on them even as high interest rates hamper their financial planning. The goal of going green might be a medium- to long-term strategy that should be diligently pursued to avoid future crises. In the short term, however, focus should be on making coal-based plants work efficiently; ICB plants are crucial in this regard.

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