Power plants

Coal India’s (CIL) surging supply to the power sector has started to build stocks on top of the plant and is expected to improve to 8 days around Diwali. This would bring the power plants, which depend on CIL supplies, out of critical stockpile condition. Increased supplies also affected the energy market, bringing average spot energy prices down to 3.76 units from 14 units last week.

Supplies from CIL and other sources to coal-fired plants are currently at 2 million tons per day versus 1.8 to 1.85 metric tons required. Total CIL supply as of October 17 was 1.74 metric tons per day. Inventories began piling up in factory heads when CIL last week raised daily supplies from 1.5 metric tons to 1.62 million metric tons. Coal stocks at power plants rose to 7.51 metric tons last week from 7.23 metric tons the previous week.

Even supplies to the non-energy sector, which were cut in half for about a day or two, have returned to normal somewhat, with South Eastern Coalfields (SECL) withdrawing its notice of no supplies to the non-energy sector. Although electronic auctions were suspended from October 13, with the exception of the electronic auction of energy futures contracts, they are likely to resume from November after being suspended for the rest of this month.

With CIL supplies gradually increasing, Gencos is not being asked to search for imports as linking coal abroad is a major obstacle with China, which produces half of the world’s coal, which has already imported more than 4.4 metric tons of thermal coal and coke from South Africa for its zero imports between 2015 and 2020. A coal ministry official said Europe began sourcing coal from Indonesia, Russia and America to meet winter demand as gas prices peaked.

Many of the 62 coal-fired plants that had an FSA with CIL went into a supercritical or critical stock position with stock between one and six days during the first week of September, when CIL prioritized the supply of those units providing coal on an “as is” basis. By laying down the railroad from the sources in which the high stock was available. The company identified 23 such mines holding 40.3 metric tons of inventory as of August 16.
Although the critical stockpile situation has persisted for a long time, nearly all 62 power plants, which currently rely on CIL coal, are out of critical stockpile status. There are allegations from a section of energy producers regarding the over-reporting of drill bits at 99 metric tons at the start of the fiscal year and 42 metric tons at the end of the current fiscal second quarter leading to supply irregularities. But CIL was saying the crisis was due to regulated intake.

An NTPC official said on condition of anonymity that power plants are shy about maintaining stocks before the monsoon and monsoon periods because the quality of the supplied coal deteriorates due to increased oxidation and the miner cannot be charged for providing low quality because the deterioration occurs in the plant’s prime. Furthermore, with unexpected power demand, keeping inventory low has been the new standard for cost-cutting coupled with mounting receivables from disruptions forcing Track to tighten its spending.

The inconveniences were also difficult at low perception from both industrial and domestic consumers, and thus the entire chain led to escalation of gencos dues to CIL, halting supplies for a few days.

CIL’s receivables from the energy sector as of date are around Rs 16,000 crore. The Department of Energy has been writing to various state governments to clear their CIL dues. However, CIL continued supplies by laying railways and roads on the war footing, a CIL official said.

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