Power Ministry Asks All Thermal Plants Using Imported Coal To Operate With Full Capacity During Summer

With electricity demand expected to hit a new peak this summer, the power ministry has directed all thermal plants using imported coal to operate with full capacity from March 16 to June 15 so as to avoid electricity shortage.The direction under Section 11 of the Electricity Act came amid rising power demand due to higher-than-normal temperature in several parts of the country. 

This order shall remain valid for generation and supply of power from March 16, 2023 to June 15, 2023, stated a notice sent to 15 thermal plants that use imported coal. The 15 imported coal-based (ICB) power plants include Tata Power's and Adani Power's plants in Mundra in Gujarat; Essar power plant in Salaya; JSW Ratnagiri; Tata Trombay; Udupi Power; Meenakshi Energy; and JSW Torangallu.

The country's peak power demand is estimated to touch 230GW in 2023. In December 2022, Union power secretary Alok Kumar had said that the government will take all possible measures to meet the 230 gigawatt (GW) single-day peak demand. As per official figures, the maximum all-India power demand met at 2:51 pm on April 26, 2022 was 201.066 GW. The latest data shows that power demand has already started rising this year. 

The peak power demand met or the highest supply in the day was 205.52GW while total electricity consumption stood at 4,281 million units (MU) on February 20, 2023. In contrast, peak power demand met and the total electricity consumption was much lower at 185.80GW and 3,802 MU on February 20 of the previous year.

The data also shows that there would be unprecedented high demand of electricity during summer this year. The ministry's notice noted that in the likely scenario of a gap in the demand and supply of domestic coal and essential requirement of maintaining coal stock at generating stations, the use of imported coal needs to be increased by way of blending with the domestic fuel in domestic coal based plants and also by ensuring optimum generation from ICB plants.

This will ease the pressure on domestic call supply and also ensure that all the plants are available during the peak demand period, it also noted. The notice sent to imported coal-based power plants also said, "It has been forecasted that peak demand will reach 229GW during April 2023. To meet this demand, about 193 GW generation would be required from thermal generating stations."

All ICB power plants shall operate and generate power to their full capacity, the notice said. Where the ICB plant is under NCLT (insolvency proceedings), the resolution professional shall take steps to make it functional, it said. Last year in May, the ministry had issued similar directions to such power plants to operate and generate power to their full capacity. But these plants do not have enough provisions for pass through of higher price of imported coal.

Therefore, the ministry had formed a committee chaired by chairperson of Central Electricity Authority to benchmark energy charges (ECR) for allowing pass through of higher cost of imported coal. According to the latest notice, since the PPAs do not have enough provision for pass through of present high prices of imported coal, the rate of power at which power shall be supplied to PPA holders shall be worked out by the committee.

This committee shall ensure that the benchmark rates of power so worked out meets all prudent costs of using imported coal for generating power, including the present coal price, shipping costs and O&M (operation and maintenance) costs etc. and a fair margin. The fixed charge will be as per the power purchase agreements or as has already been agreed mutually between the generating company and the procurers, it stated.

The PPA holder shall have an option to make payment to the generating company according to the benchmark rate worked out by the committee or at a rate mutually negotiated with the generating company, it said. These plants will supply power in the first instance to the PPA (power purchase agreement) holders (discoms). Any surplus power left thereafter or any power for which there is no PPA will be sold in the power exchanges, it stated. It also provided that where the plant has PPA with multiple discoms, if one discom does not schedule any quantity of power according to its PPA, that power will be offered to other PPA holder(s) and anything remaining quantity thereafter will be sold through the power exchanges.

It stated that where any discom/state is not able to enter into mutually negotiated rates with the generating company and is also not willing to procure power at the benchmark rate worked out by the committee or is not able to make weekly payment then such quantity of power shall be sold in the power exchanges.

The net profit, if any, by the sale of power which is not sold to the PPA holder (discom) and is sold in the power exchanges, shall be shared between the generator and PPA holder in the ratio of 50:50 on a monthly basis, it provided. The ministry had also issued guidelines on January 12, 2023 for procurement of power from untied capacity of imported coal based plants during the crunch period (April and May) on competitive bidding basis.

In order to meet the demand and supply gap, the power ministry has also directed (on January 9, 2023) to state-owned as well as private power plants to import coal for blending at the rate of six per cent in domestic dry fuel by weight so as to have sufficient coal stocks and smooth operatons till September 2023.