Fitch Ratings: India’s Power Demand and Coal Outlook for 2023

India’s power demand is expected to grow by 7% year-on-year in FY24, as estimated by a report from Fitch Ratings. This growth follows a 7.1% increase in the first half of the current fiscal year, driven by robust industrial activity.

The report highlights that the strong power demand is likely to keep the average thermal power plant load factor (PLF) above 60%. Over the past three months, power demand has shown a consistent monthly growth of around 20%, compared to the corresponding months of FY23.

Despite government efforts to maintain adequate coal stock through increased local supply and higher imports, the report notes that thermal coal inventory fell to only 8.4 days of adequacy by the end of September, well below the usual 18 days. The Ministry of Power responded to the surging demand by mandating the blending of 6% imported coal until March 2024 and urging all imported coal-based power plants to operate at full capacity until the end of the current financial year.

Coal Outlook and Renewable Energy

In a related development, Crisil predicts that the capacity utilization of coal power plants will improve to 65% in the current fiscal year. This projection is noteworthy despite the significant addition of renewable energy capacity.

The Ministry of Coal has outlined plans to enhance coal production, with targets of 1,404 million tonnes (MT) by 2027 and 1,577 MT by 2030, exceeding the expected domestic requirement for thermal power plants. The additional coal requirement for an extra 80 GW of thermal capacity by 2030 is estimated to be around 400 MT, assuming an 85% plant load factor (PLF).

Coal stocks have been building up at thermal power plants, reaching approximately 20 MT, and the total stock, including transit and captive mines, stands at 73.56 MT, a 12% year-on-year increase. The growth in power generation for domestic coal-based plants is recorded at 8.99%, while coal production has grown by 13.02% year on year. The Ministry of Coal acknowledges the need for additional coal to meet the expanding thermal capacity and assures plans for increased production and capacity expansion from various sources.