India's thermal power plants have lowered procurement of imported coal to run their operations due to the gradual build-up of inventory levels. This comes after these plants had maintained higher imports to address the domestic scarcity.

As per provisional data furnished by the power ministry, coal imports by thermal power plants decreased 10% m-o-m to 4.54 million tonnes (mnt) in October, 2022, which is the lowest in six months (since April, 2022).

However, imports were 114% higher y-o-y compared to 1.82 mnt recorded in October, 2021.

Demand for imported coal surged this year to compensate for the shortfall in domestic supplies at a time when inventories at power plants had fallen to alarming levels. Such was the criticality of the situation that the government had directed these plants to import 10% of their requirement for blending purposes, failing to which a penalty in the form of domestic supply cut was proposed.

The stringent measures bear fruit as the plants have accumulated 28.33 mnt of coal inventory in end-October, 2022 which was nearly 102% higher than the year-ago levels. This compelled the government to roll back its decision, besides, the requirement for imports was brought down altogether.

Apart from the remarkable support from domestic supplies, lower coal consumption which fell to an 8-month low of 58.34 mnt in October, 2022, led by subdued power demand also contributed to the cause.

Domestic coal-based plants lead in import numbers

The power plants designed to run on imported coal have traditionally accounted for major share in imports than the plants based on domestic coal.

It is important to note that imported coal-based (ICB) plants were set up at coastal regions as it helps them save the logistics costs instead of procuring domestic supplies from far away domestic mines.

However, domestic coal-based plants were heavily involved in imported coal procurement this year at a time when supply of indigenous coal failed to keep pace with elevated demand. Total imports by these plants have increased 5-folds to 25.4 mnt during April-October, 2022.

On the other hand, imports by ICB plants were assessed almost stable at 13.44 mnt in April-October, 2022 as against 13.09 mnt in April-October, 2021. Notably, operations at these plants were impacted by higher fuel costs which saw several utilities running at reduced capacity while few of them were completely shut down.