Power Sector Situation Worsens Further

The situation of the Indian power sector seems worsening despite various attempts made by the government. According to a recent report by the Central Electricity Authority (CEA), 50267 MW of the coal based power generation capacity is having a coal stock of less than a week. This accounts for 51% of the coal-based power generation capacity of the country. Of the total 90 power stations, 36 have a critical coal supply position of less than 7 days. Of these 36, two (Lanco's Anpara TPS – 1200MW and DVC's Koderma Coal Power Plant - 500MW) do not have any coal, indicating the grave situation of these power plants.

In the list provided by CEA there are 12 power stations which has more quantity of coal than normative requirements of 15-20 days. This however represents 6355MW or 6.5% of total coal-based thermal generation capacity. The data also suggests that Karnataka and Punjab are the only states having no capacity facing severe coal shortage at the moment.

On the gas front, there is major another negative news. The Rangarajan Committee has suggested that gas prices should be fixed on the basis of weighted average of a few global gas price benchmarks. The panel has also has suggested, shifting to market-based prices in the next five years. At that level the gas prices would nearly double from the current levels making it difficult for gas-based companies to even survive. Already, gas-based generation in the country has tumbled and a further increase in prices would not bode well for power companies at all.

With Gas and Coal-based power generation facing a fuel crisis, results of the December 2012 quarter may not be very handsome. Coal-based power plants have already seen PLFs coming down from 71.20% (H1FY12) to 68.27% (H1FY13). During same period, the PLFs of the gas based plants have come down heavily from 61.71% to 45.99% showing a horrific situation of gas based plants.

As the fuel situation is persistently worsening, the Power sector seems to be heading to a bleaker future. We have carried a detailed report on the power sector with our long term outlook on it in our recent issue of Dalal Street Investment Journal. Please click here for online version.