Indian generation growth points to coal supply mismatch

India's coal-fired power generation in May grew at its fastest pace in the previous seven months, dwarfing the rate of increase in domestic coal supplies to utilities, a trend that could exacerbate an inventory drawdown at power plants and support the outlook for imports.

India's overall coal-fired generation — which meets most of the country's power requirements — rose by 13pc from a year earlier to 119.54TWh last month, according to data from the Central Electricity Authority (CEA). May coal-fired generation was also higher from April's 116.5TWh, the highest monthly output since at least since 2016, according to Argus data. The year-on-year growth last month was the highest since October 2023 when coal-fired generation increased by 33pc from the same month in 2022. The generation growth hovered between 2-10pc during November 2023-April 2024.

Domestic coal supplies to utilities also grew to cater for the increase in power output and demand but the pace of growth was softer than the rate of increase in generation. Domestic coal supplies to utilities grew by 7pc from a year earlier to 74.22mn t in May, according to data from the coal ministry. Average growth during January-May was 7pc this year, up from 6pc a year earlier but still weaker than the average 10pc growth in coal-fired generation in the same period this year.

This has led to an increased inventory drawdown, especially as summer heatwaves supported power demand, lifting the prospect of stable coal imports by Indian firms, led by the utilities. Combined coal stocks at Indian power plants slipped by 6.2pc to 47.55mn t as of 4 June from 50.69mn t on 31 March, the end of India's 2023-24 fiscal year, according to CEA data. The drop in inventories has been cushioned by a steady increase in domestic coal output and supplies, along with an increase in imports.

The country might have imported 17.05mn t of thermal coal last month, according to data from global trade analytics firm Kpler. This would be up on the previous month's 16mn t but down from 17.65mn t estimated for May 2023 by Kpler. Data for last month's coal imports are yet to be released by shipbroker Interocean but it estimated imports at 16.99mn t for April, up from 16.46mn t a year earlier.

The increase in domestic coal supplies and imports comes as authorities have implemented measures to ensure steady power supplies to meet peak summer electricity demand. The measures include directives from the federal power ministry to utilities that run on domestic coal to use 6pc imported coal in their fuel mix until 30 June. The ministry has also asked power plants that run on imported coal to keep power generation levels high until 15 October, supporting the prospect of higher imports from these utilities. These coal-fired plants have a combined capacity of 17.5GW.

Authorities are re-evaluating the order to domestic coal-fired utilities for importing coal for blending. The directive might not be extended beyond June, given the prospects for above average monsoon rainfall this year that could lift hydropower generation and put pressure on coal-fired output, a government official told Argus.

Domestic coal supply mix

State-controlled Coal India (CIL), which meets most of India's coal requirements, supplied 55.81mn t of coal to the power sector, up by 5.7pc from a year earlier and from 51.88mn t in April. This was supported by growth in its output and overall supplies last month. CIL produced 64.4mn t in May, 7.5pc higher from a year earlier.

Higher supplies by CIL helped to partly offset reduced flows to the power sector by fellow coal producer Singareni Collieries (SCCL) in May. SCCL supplied 5.18mn t, down by 2.8pc from a year earlier and nearly unchanged from 5.17mn t in April. SCCL's overall output dropped by 2.4pc from a year earlier in May to 5.73mn t, coal ministry data show.

Captive coal block producers and other small government mining entities comprised the remainder of supplies to utilities last month.

Generation mix

India's hydropower output last month rose by 7pc from a year earlier to 12.26TWh, according to CEA data. This was also up from 8.11TWh in April. The increase was partly supported by increased flows at dams, with snowmelt from the mountains boosting river flows, the government official added.

India's gas-based power generation increased to 5.05TWh in May, up from 2.83TWh a year earlier, CEA data show. This rose following an order from the power ministry in April to boost output between 1 May-30 June to help partly meet summer demand.

Renewable power output rose to 21.07TWh in May, up from 18.12TWh a year earlier, according to grid operator Grid Controller of India, also known as Posoco. Increased wind generation during the month partly supported the higher renewable power output and helped to meet electricity demand, the official added.

India's nuclear power generation was 4.39TWh in May, up from 3.50TWh a year earlier.

By Saurabh Chaturvedi

Growth in coal-fired power vs coal supplies to utilities 2024 (y-o-y % ±)

Growth in coal-fired power vs coal supplies to utilities 2023 (y-o-y % ±)