Coal Stocks Critical at 77 Plants; Captive Units Told to Run Full
Seventy-seven of 190 thermal plants have critical coal stocks, and the Centre has invoked Section 11 to make captive plants run at full capacity.
India’s thermal power plants are running dangerously short of coal just as electricity demand hits seasonal records, prompting the Centre to order captive power units owned by some of the country’s largest industrial groups to run at full capacity for the rest of the year. As of 26 September, 77 of the 190 thermal plants tracked by the authorities held critical coal inventories, according to data reported by Business Standard.
Total coal stocks at these plants stood at 21.98 million tonnes, down 24 per cent from about 29 million tonnes on 31 August. That is enough for roughly seven days of generation, or about 37 per cent of the required level. Two days earlier, on 24 September, 80 plants were in the critical category with stocks of 22.3 million tonnes, suggesting only a marginal improvement.
Demand surge meets a weak monsoon
The squeeze has been building through September. Peak power demand touched 269 gigawatts on 10 September, the highest ever recorded for the month. At the same time, hydroelectric output has fallen 12 per cent from a year earlier because of weak monsoon rainfall, forcing grid operators to lean more heavily on coal. Coal-fired generation has risen 18 per cent in September, drawing down inventories faster than supplies could be replenished.
The situation echoes earlier episodes. Coal stocks fell to about 7.5 days of cover in October 2023, and to around four days in September 2021, when several states faced power cuts. Anujesh Dwivedi, a partner at Deloitte, told Business Standard he viewed the current problem as largely a temporary logistics and inventory issue rather than a structural shortage.
Section 11 order for captive plants
The Ministry of Power has invoked Section 11 of the Electricity Act, 2003, which allows the government to direct generating companies to operate in a specified manner in extraordinary circumstances. Under the order, captive coal-based plants of 50 MW and above must run at maximum available capacity from 1 October to 31 December 2026. ANI reported that the directive covers 112 captive plants.
These plants must maintain adequate coal stocks, sell any surplus electricity left after meeting their own requirements on power exchanges, and submit weekly reports to the Central Electricity Authority. The ministry cited the prevailing demand-supply situation and the expected rise in electricity demand in the coming months as reasons for the order. It said the intention was to ensure that the entire capacity of all sources of generation, including captive units, is used to the maximum extent.
Among the companies whose captive plants fall under the order, according to ANI, are Tata Steel, Vedanta, Hindalco, JSW Steel, UltraTech Cement, Indian Oil and NALCO. Officials are also discussing whether to make blending of imported coal mandatory for thermal power plants, a step used in previous shortages.
Why it matters for companies and investors
For the industrial groups named, the order is a mixed proposition. Captive plants are built mainly to supply steel mills, aluminium smelters, cement kilns and refineries with reliable, low-cost power. Running them at full tilt means buying and storing more coal at a time when supplies are tight, which could push up fuel costs. On the other hand, surplus power sold on exchanges during a period of high demand could fetch attractive prices, partly offsetting that burden.
Power exchanges such as Indian Energy Exchange stand to see higher traded volumes if captive producers bring surplus electricity to the market. Coal India and its subsidiaries will face pressure to step up dispatches, while the Railways, which moves the bulk of domestic coal, will be under scrutiny for rake availability. State distribution companies, many of which are financially stretched, may have to pay more for power bought on exchanges during peak hours.
A mandate to blend imported coal would add to India’s import bill at a time when crude oil is already trading above $100 a barrel and the rupee is near record lows. Imported coal is typically costlier than domestic supply, and generators would seek to pass the higher cost on to distribution companies and, eventually, consumers.
The timing is also sensitive. The festive season, which typically lifts demand from households and commercial establishments, begins in October. Any power cuts during this period would hurt both consumer spending and industrial output, just as the economy navigates higher oil prices and the prospect of rising interest rates.
What happens next
The Section 11 directive takes effect on 1 October, and the weekly reports to the Central Electricity Authority will offer the first indication of whether captive plants are meeting the mandate. Market participants will also watch for a decision on imported coal blending and for any change in the daily coal stock data published by the authority.
Much will depend on the weather. A retreat of the monsoon and cooler temperatures in the second half of October could ease demand, while a delayed withdrawal or a hot spell could stretch inventories further. For now, the Centre appears to be building a buffer before the festive peak rather than waiting for shortages to turn into outages.
