November 2020

In line with the improvement in power demand, the coal-based power generation segment has started to show some signs of recovery after being hit by the Covid-19 pandemic. There has been an improvement in headline numbers, with PLFs and power generation witnessing an increase. While generation grew (month on month) by 10 per cent in September and by over 14 per cent in October this year, PLFs improved by 600 basis points in October over the previous year. During the lockdown, the must-run status of renewable power plants had resulted in a steep fall in the PLFs of the already stressed coal-based power plants as discom demand plunged.

Despite improvements, the coal-based segment continues to face a number of ongoing challenges. Coal shortages are haunting the segment once again. The monthly power situation in Punjab has turned grim with thermal plants nearly running out of coal stock. Coal supplies to thermal power plants have been severely affected after IR suspended the operation of freight trains in the wake of the blockade of some railway tracks by farmers. The state has already begun imposing power cuts in the agricultural, domestic and commercial sectors.

Meanwhile, the Association of Power Producers (APP) has recently made a representation to Finance Minister Nirmala Sitharaman regarding funding issues in the sector. The APP has stated that under the liquidity package, only around Rs 310 billion has been disbursed to the states till date, while the overdue amount to generators has increased to approximately Rs 1,250 billion as of September 2020. Meanwhile banks, due to the continuing stress in the power sector, are also reluctant to fund the investment needs for meeting the new environment rules for coal-based power plants. Around Rs 500 billion of investment is needed for the 120 GW of power plants that are yet to place FGD equipment orders.

The segment also faces challenges in meeting the MoEFCC’s emission norms. Only six units, totalling 2,160 MW or just about 1 per cent of the targeted capacity, have commissioned FGDs. This is extremely low in the context of the phased implementation plan, which requires FGD implementation in plants with an aggregate capacity of 5.44 GW by 2019 and 31.77 GW by 2020. Further, with supply chain disruptions owing to Covid, a number of FGD projects have been delayed or fallen behind schedule. The Ministry of Power has recently written to the environment ministry on the issue and it is expected that a two-year extension till 2024 would be provided to the majority of plants for installing emission control equipment.

Power Line’s special section on Coal-based Power Generation this month takes a closer look at some of these issues, as well as the key trends and developments in the segment.