The Reserve Bank of India expects the mismatch in demand-supply of coal to remain tight in the near-term due to dwindling imports on back of high prices and elevated shipment freight rates.

The supply shortage for thermal power sector has worsened in the last few months, owing to both monsoon-related disruptions in domestic supply and lower imports, said the RBI in its bulletin.

Shortage impact

Since coal is also used as a primary input in several industries, its shortage is bound to have a bearing on the production of these industries.

Apart from the electricity sector, iron and steel, non-metallic mineral products and refined petroleum products are among the major industries which use coal and lignite as raw materials for their production. Iron and steel consumes highest proportion of coal as input. Given the extent of usage as inputs, coal shortage could have some negative transient impact on coal-intensive industries, said the RBI.

Finished steel production witnessed a deceleration in year-on-year growth from 7.7 per cent in July to 6.2 per cent in September and further to 3.9 per cent in October. Steel consumption declined by 3.2 per cent in September and 6.7 per cent in October.

The Federation of Indian Mineral Industries, early this month, sought the intervention of the Prime Minister’s Office to resume normal coal supplies by Coal India and availability of railway rakes by Railway Board for metal companies.

Coal India had advised Indian Railways to enhance the rake supplies exclusively for power sector to 296 rakes per day, compared to a combined 272 rakes per day for both power and non-power sector in November. Such a step will put the consumers of non-power sector in a precarious situation depriving them from getting sufficient 50 coal rakes per day even for its sustained operations, said FIMI in a separate letter to Indian Railways.

Power Sector

As on October 12, 115 thermal plants contributing about 85 per cent to total thermal power capacity were having coal stocks for up to 6 days. Of these, 18 plants with about 11 per cent of total capacity had no coal stock while 80 plants with about 61 per cent of power capacity had 1-4 days of coal stocks.

Subsequently, the situation improved and the number of plants having up to 6 days of coal stocks declined to 82 and further to 58 on November 24. Overdue payments to coal companies have also contributed to low coal stocks in case of some States.

Water-logging in coal-bearing areas due to heavy rains hindered dispatches from coal mines, resulting in lower than normal stock accumulation by the thermal power plants in October.

The short supply of coal was largely due to sharp rise in power demand, supply disruptions due to monsoon and reduction in imports on the back of steep rise in international prices.