Indian power plants tap stockpiles, cut purchases as coal use slides

Reuters

a day ago

SINGAPORE/NEW DELHI, Aug 6 (Reuters) - India's power plants are withdrawing more coal from record high inventories and slashing fresh purchases from state-run Coal India (COAL.NS), opens new tab, as coal use for power generation fell for a fourth month despite a rise in electricity demand.
Coal-fired power plants typically draw from inventories when electricity demand growth outpaces production by Coal India, which accounts for about three quarters of the country's production. India is the world's No.2 coal producer and consumer after China.
But a sustained rise in hydro and renewable power has curbed coal-fired output, according to analysts and government data.
Coal inventories held by power plants fell 13% in July from a record 58.1 million metric tons by end-June, much steeper than the average 2% drop during the month over the last decade, Citi analysts said in a note on Monday.
"Adequate inventories and no risk of a coal shortage have helped power plants reduce buying from Coal India," said Partha Sarathi Bhattacharya, former chairman of Coal India, adding that utilities now had more flexibility in managing their costs.
"But this is transient, and coal buying will increase once power demand starts growing faster," said Bhattacharya, who is currently chairman of Peerless Group, which has investments in sectors including finance and healthcare.
Coal India's production in July plunged at the steepest pace since 2019 and supply declined at the fastest rate in five years, company data showed, with July production falling 15.6% and supply by 9.9% compared with the same period last year.
The drop is also due to higher production by private miners, which have been eating into Coal India's market share after New Delhi opened up coal mining to the private sector in 2020.
Growth in electricity use has tapered this year due to a broader economic slowdown and heavy rains reducing cooling demand, but generation picked up slightly in July.
Still, coal-fired generation, which typically accounts for about 75% of India's electricity output, fell for the fourth month in July, an analysis of data from federal grid regulator Grid-India showed.
A 22.4% annual growth in hydropower generation and 14.4% increase in generation from renewable sources including wind and solar in July helped meet 1.8% growth in power generation to 164.66 billion kilowatt hours (kWh) despite the 4.2% decline in coal power, the data showed.
The share of coal in power generation fell to 64.3% in July - its lowest in five years and down from 68.3% a year earlier.
With India adding a record 22 GW of new solar and wind capacity in the first half of 2025 and planning to increase non-fossil fuel power capacity to 500 GW by 2030, analysts expect a further decline in the share of coal-fired power.