Short-term Power Prices Likely to Remain Elevated Due to Increase in Imported Coal Prices


India Ratings and Research (Ind-Ra) believes short-term power prices are likely to remain elevated in the near term, on account of a continued increase in imported coal prices. Although a large part of the incremental generation would continue to be met through coal-based power plants, given the other sources of generation are already on must run and likely healthy growth in energy demand, coal output is not increasing to the desired level.


This is reflected in low inventory stocks at power plants; therefore, a part of the incremental energy demand will have to be met through imported coal. Thus, in light of the expected high imported coal prices, the short-term power prices in India are likely to remain elevated.

Ind-Ra estimates an increased imported coal requirement likely in 2HFY22 as domestic coal production would increase gradually. Alternatively, in case the PLFs of imported coal-based power plants would continue to remain low due to high international coal prices, Ind-Ra estimates the energy deficits are likely to increase in 2HFY22.

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During 5MFY22, the all-India energy demand already surpassed the pre-Covid levels at 597 billion units (BU; 5MFY20: 578 BU), whereas the demand grew 16% yoy (5MFY21: 515BU).

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