India's coal imports by the power sector are expected to increase in September 2023 compared to the previous month due to higher demand. The Power Ministry has directed power plants to import 4 percent of coal for blending with domestic stocks to address an anticipated coal shortage of 7 million tonnes in H2 FY24.

A senior government official noted that domestic coal-based power plants are facing a coal shortage due to increased electricity demand driven by heat and humidity. Imports are expected to exceed the levels seen in August 2023.

According to energy intelligence firm Kpler, India's thermal coal imports rose by 8.5 percent month-on-month to 12.30 million tonnes last month. However, on an annual basis, inbound shipments were lower by 17 percent.

Kpler's Lead Major Dry Bulks Analyst, Alexis Ellender, anticipates robust demand for seaborne thermal and metallurgical coal imports to persist in September. India's thermal coal imports in September to date (as of September 20) reached 8.38 million tonnes, putting it on track to exceed the August total.

Ellender pointed out that the government's measures to support import demand, coupled with potential restocking at power plants, are contributing to increased imports. Power plant stockpiles are down nearly 20 percent month-on-month, with stocks at plants designed to run on imported coal down 16 percent.

However, the situation may change if there are weaker-than-usual rains, resulting in less weather-related disruption at mining sites and increased domestic coal supply. Typically, September represents a low point for domestic coal production, with output increasing in the October-December quarter, which could reduce the demand for imported coal later in the year.

Data from the Central Electricity Authority (CEA) and the National Power Portal indicate that coal stocks at domestic coal-based (DCB) power plants have been depleting. The gap between coal receipt and consumption at DCB plants is being met by drawing down from reserve coal stocks and using imported coal. This gap was around 2 lakh tonnes per day for September, compared to approximately 6.3 million tonnes for August.

In FY24 until September 23, DCB plants consumed 393.50 million tonnes of coal, against a receipt of 367.9 million tonnes. Imported coal accounted for 16.4 million tonnes to bridge the gap, while the remaining shortfall was met by drawing down from reserve coal stocks.

The data suggests that coal stocks at DCB plants are declining, with critical stocks reported at 40 plants. Peak power demand in India averaged 210.48 gigawatts between September 1 and 25, with a peak shortage of 1.46 gigawatts and generation outages of 42.42 gigawatts during the same period.