Surplus Coal Sale Planned by Odisha Coal and Power Ltd at Discounted Rate
Amidst reduced demand for coal, Odisha Coal and Power Ltd (OCPL), a state-run entity in eastern India, is set to auction 3 million tons of surplus coal on October 4. The OCPL will be offering a 15% discount on the base price set by the national coal index for this auction. The move by OCPL reflects an oversupply of coal in the market, accompanied by lower demand.
Increased Domestic Coal Production in India
Data from India’s coal ministry indicates that the country’s total domestic coal production saw a significant year-on-year increase of 7.12%, reaching 370 million metric tons between April 1 and August 25. This rise in production can be attributed to the decrease in electricity demand from coal-fired power plants and the subsiding monsoon rains. With the increase in domestic production and surplus stocks, OCPL’s decision to attract buyers through discounted prices seems logical.
Record-High Indian Coal Production
India achieved a record-high domestic coal production of 997.828 million tons in the fiscal year ending on March 31. This marks a remarkable 12% increase compared to the previous year. Despite being heavily reliant on coal-based power generation, with coal accounting for 75% of India’s total power generation in 2023, the country still relied on importing 176 million tons of thermal coal primarily for power plants.
Decline in Thermal Coal Imports and Increased Inventories
A positive development stemming from increased domestic production is the expected decline in thermal coal imports for the first time since the onset of the COVID-19 pandemic. India’s higher production levels have led to historically high inventories of coal, reducing the need for imports to meet the energy demands of its power plants. This decline in imports is in line with the government’s objective of reducing reliance on foreign sources for coal.
The surplus coal auction by OCPL showcases the changing dynamics in the coal sector in India. With surplus production and decreased demand, power plants are receiving offers for discounted rates. This move provides an opportunity for efficient utilization of coal resources within the country. The increased domestic production not only aids national energy security but also aligns with India’s larger commitment to reduce carbon emissions and promote sustainability in the energy sector.
