Higher coal imports likely to increase cost of supply for discoms by 4.5-5% in FY23: ICRA
Follow us Now on Telegram ! Get daily 10 - 12 important updates on Business, Finance and Investment. Join our Telegram Channel
Credit rating agency ICRA in its latest report has stated that the government measures to ease power supply constraints through higher coal imports are likely to increase cost of supply for discoms by 4.5-5.0 per cent in 2022-23. On May 5, Ministry of Power (MoP) issued a directive under Section 11 of the Electricity Act, stating that all imported coal-based power plants shall operate and generate power at their full capacity to meet the growing demand. As per this directive, all states and power generating companies (gencos) based on domestic coal will have to import at least 10 per cent of their fuel requirement for blending with domestic coal and meet the growing demand for electricity. This directive by the ministry is valid till October 31, 2022.
The report said all-India energy demand in April and May 2022, grew 11.5 per cent and 17.6 per cent year-on-year, respectively, also supported by heat wave and weather conditions, while tight domestic coal supply position and elevated international coal price levels continued to affect the energy generation levels. It said measures directed by MoP are thus likely to considerably increase the coal import dependency for the power sector from about 4 per cent in FY2022 to about 12-13 per cent in FY2023.
According to the report, the higher share of imports for thermal generation under a pass-through arrangement as directed by MoP is further expected to lead to an increase in the cost of supply for state discoms by 4.5-5.0 per cent in FY2023 at an all-India level, considering the increase in the share of imported coal and coal price level at $110 per MT for coal gross calorific value (GCV) of 4,200 kcal/kg. The share of coal imports in the power sector declined to about 4 per cent in FY2022 from 8 per cent in FY2021, amid an increase in international coal prices by more than 150 per cent over the last 12-month period. With this, the variable cost of generation for imported coal-based power projects is estimated to have increased by more than Rs 3 per unit between March 2021 and May 2022.
