India lockdown: Thermal coal supply declared as essential service

Source : https://www.spglobal.com/platts/en/market-insights/latest-news/coal/033020-india-lockdown-thermal-coal-supply-declared-as-essential-service

 

The supply of thermal coal in India has been declared as an essential service and officials are to maintain its critical dispatch during the country's lockdown period, Union Minister of Coal, Mines and Parliamentary Affairs Pralhad Joshi said Saturday.

 

India's Prime Minister Narendra Modi has announced a 21-day lockdown on the country from March 25 to combat the coronavirus pandemic.

Measures have been put in place to monitor the coal production and dispatches to power plants so that energy and other critical sectors remain unaffected amid the current coronavirus situation, according to the ministry.

Coal India Limited, or CIL, an Indian state-owned coal miner and the largest coal producing company in the world, has been working to ensure coal supply to the power utilities across the nation, sources said.

A north India-based trader said that CIL will be able to cater coal supply to power plants in central India which do not rely on the imported materials.

"Power plants near coasts have also been given permission to obtain coal from the port stocks," he said.

There will be a dip in imported coal demand during the lockdown period amid tepid industrial activities, said another north India-based trader.

Power demand has dipped by 30% and coal stocks at power plants are sufficient as of now, said a west India-based trader.

Stockpiles at Indian power plants rose 5.4% on the week at 42.9 million mt Thursday, with a daily consumption rate of 1.68 million mt, down from 1.76 million mt, according to latest data from India's Central Electricity Authority.

This was sufficient for 25 days of coal burn, up from 23 days.

Feasibility

Some traders, however, were skeptical on the feasibility to implement and ensure the delivery of coal from mining regions to power plants in India.

"Declaring supply of coal as an essential service is a positive sign but there are many uncertainties," said a west India-based trader "for coal mining schedules and further transportation risks would be highly dependent on the spread of the coronavirus."

"It is difficult to predict beyond a point, we take news as it is day by day," he said.

An Indonesia-based trader said that the declaration of coal supply as an essential service was an expected move, otherwise India might start to experience blackouts.

Another issue that the Indian government need to manage is on the quarantine measures for the incoming coal loading ships, he said.

"India buyers who were planning to use public ports have already postponed their laycan to April as port operations have been sluggish," he said.

"In India, a number of coal terminals have declared force majeure after the government announced at 21-day lockdown across the country and we expect the current stockpiles at Indian ports to be more than sufficient to cover the short-term demand, given that demand from the power sector had been expected to fall on the back of the macroeconomic situation," said Matthew Boyle, lead coal analyst from S&P Global Platts Analytics.

Furthermore, the current utility and higher port stockpiles as well as increasing domestic production ahead of the fiscal year-end March 31 means there should be sufficient material to cover demand, he said.

India's Ministry of Coal could not be reached for immediate comments.

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