The nation currently is grappling with a severe coal shortage. Fifteen thermal power plants had zero days of coal stock on hand as of September 30, with a generation capacity of 15,385 MW. 16 thermal power plants on October 4 with a power generation capacity of 17,475 MW had zero days of coal stock. 104 thermal plants of the total 135 thermal power with a capacity of 126.8 GW are currently classified as having “critical” or “supercritical” levels of coals stock for up to a week.
A total of 72 plants with a capacity of 89.5 GW have coal stocks of three days or less against the government’s guidelines of stocks for 14 days. The news was buzzing yesterday about the increasing number of thermal stations left with coal stocks for four days on an average down from the average of 13 days at the start of August, with Union Power Minister R K Singh saying the coal supply situation is likely to be “uncomfortable” for up to six months.
In a country where 70% of the electricity is generated using coal, the issue is worrisome.
Around 98 plants out of the total 108 lie in non-pithead plants or plants which are not located close to coal mines, are facing an even more severe shortage. India’s coal-fired thermal power plants account for 208.8 GW or 54 percent of India’s 388 GW installed generation capacity.
Reasons
A couple of reasons have pushed the scenario so deep into the well. The first one being the annually recurring rains in August and September which hamper the production every year during this season. Coal production during monsoons is typically low, as rain in the coal-bearing region makes the mines inaccessible, even more in the open cast mines which account for an overwhelming share of the output.
Problems additional to this year are the acute mismatch between the demand-supply and rising global coal prices. Soon after a deadly second wave of Covid-19, the nation’s economy was headed for recovery and demand for power rose sharply. Power consumption in India anyways sees peeking demand in the post-monsoon months due to the festive season. Power consumption in the last two months alone jumped by almost 17%, compared to the same period in 2019.
Global coal prices have increased by 40% this year as the easing pandemic has seen people consuming more power all over the world, owing to which India’s imports fell to a two-year low.
For example, the price for coal imports from Indonesia, one of India’s major suppliers, which was at $60/tonne in March, has massively grown to $200/tonne in September, making imported coal an undesirable option for power plants. Moreover, a major power crisis in China has added to the increase in global prices.
Out of the 70 percent electricity generated by coal-fired power plants in India, nearly three-fourth is generated using domestically mined coal, while the remaining quarter of energy is produced using imported coal. India is the world’s second-largest importer of coal despite also being home to the fourth-largest coal reserves in the world. Power plants that usually rely on imports are now heavily dependent on Indian coal, adding further pressure to already stressed domestic supplies.
Thermal power plants accumulating lower than normal stock in the April-June period simply added to the burden. CIL said in a statement that coal stocks were at a comfortable level of 28.4 MT at the beginning of the financial year. CIL was quoted as saying on 29 September, “Had the power utilities maintained the CEA-prescribed normative stock of 22 days the low coal stock situation could have been averted,” as reported by Hindustan Times.
What Is At Cost
The nation has been struggling to break free of the struggles brought upon by the pandemic. The coal shortage might obstruct the gradual shift of the country to its economic tracks.
Moreover, the market may start holding inflationary tendencies if the plants start importing. The power plant, in case they resort to currently costly imports, would end up pushing the cost on to the consumer, making power costly for masses gearing up for festivals.
Union Power Minister RK Singh in an interview with The Indian Express said the government has connected an additional 28.2 million households and these households are buying lights, fans and television sets leading to an increase in power demand. “We touched 200 Gigawatts during the Covid period, and the demand has been hovering around 170-180 GW. I expect it to go up again to near about 200GW, and stay there.” India consumed 124 billion units of power in August 2021 compared to 106 billion units of power in August 2019 which was not impacted by the pandemic.
“We have seen shortages in the past, but what’s unprecedented this time is coal is really expensive now,” said Dr. Aurodeep Nandi, India Economist and Vice President at Nomura.
“If I am [as a company] importing expensive coal, I will raise my prices, right? Businesses at the end of the day pass on these costs to consumers, so there is an inflationary impact – both direct and indirect that could potentially come from this,” he added.
Ms. Zohra Chatterji, the former Chief of Coal India Limited – a state-run enterprise responsible for 80% of the country’s coal supply – said that “if this persists, Asia’s third largest economy will struggle to get back on track.”
“Electricity powers everything, so the entire manufacturing sector- cement, steel, construction – everything gets impacted once there is a coal shortage.”
She calls the current situation a “wake-up call for India” and says the time has come to reduce its over-dependence on coal and more aggressively pursue a renewable energy strategy. A mix of coal and clean sources of energy is the only possible long-term solution, according to most experts.
Way Out
According to government data from the power ministry, however, it is unlikely that power generation plants will completely run out of fuel.
Power Minister Singh clarified that the shortage has not yet led to a power crisis. He added that “there is no need for rationing (cutting power supplies for certain areas on a rotational basis) and insisted that the production will be able to meet the demand over the next few days.”
“We are meeting the entire demand of the country and the demand is increasing,” Singh was quoted as saying by NDTV.
An inter-ministerial team, including representatives of the Power and Railway Ministries, Coal India Ltd, the Central Electricity Authority and Power System Operation Corporation, is monitoring the supply of coal to thermal power plants.
Also, the Ministry of Coal announced on Tuesday, 5 October, that coal mines that produce coal solely for their own use, which are known as “captive mines”, will now be allowed to sell 50 percent of their annual output in the open market.
In order to increase the coal supply, the Power Ministry is also beginning to accelerate the production from a number of mines that already have all requisite clearances in place.
“Somewhere, the clearances are available, the bidding for MDOs (Mine Developer and Operator) etc is (going on). Where the clearance and land is available that can be expedited. Where the clearances are pending, I have taken up with the environment ministry,” Singh said.
The government has also boosted the number of rakes of coal being transported to thermal power plants daily with 263 rakes of coal dispatched from coal mines on Monday up from 248 rakes on Sunday. “It is expected that the despatches from coal lines will increase further,” the government said in a release.