Coal Crisis In India

In April 2022, India's daily electricity shortfall climbed from 0.3 percent to 1 percent. As a result, the price of power traded on Indian exchanges increased by 85 percent from an average of Rs 3/kWh to Rs 8.23/kWh in March. The CEA has set a limit of Rs 12/kWh for short-term electricity exchange rates to keep prices in check. Low coal supply, will prevent National Thermal Power Corporation (NTPC) from increasing its plant load factor – its power output in relation to its fuel — by more than 70.7 %. NTPC had boosted its load to this level in 2021, up from 66 % in 2020. States like Andhra Pradesh, Gujarat, Maharashtra, Jharkhand, Bihar, Haryana, and Uttarakhand have used load shedding and planned outages to meet the peak demand.

India is particularly heavily hit by this circumstance because it imports the majority of its coal, primarily from Indonesia, South Africa, and Australia. Despite possessing the world's fourth-largest coal reserves, India's coal production has slowed in recent years due to lower investment attractiveness in fossil fuels to fulfill climate commitments. The situation has worsened to the point where many industries may be forced to reduce production or shut down. Such roadblocks in coal procurement may have a negative influence on the manufacturing sector, which would then trickle down to the country's common people.

Due to recent shortages, companies have been obliged to buy power from the exchange, causing an unjustified increase in demand and an unwanted inflationary impact on economic stakeholders. This is also lowering the availability of power for home use, as state utilities are finding it impossible to obtain huge quantities of power at exorbitantly expensive costs. Smaller companies, such as fertilizer makers and tea producers, have been particularly hard hit, and are now trying to stay afloat. Despite being the world's fourth-largest exporter, the tea sector is paying double the typical amount of coal, at 20,000 per tonne from the open market.

To assure coal availability for utilities and address widespread power outages across the country, the Union government has diverted coal supplies from non-power sectors and postponed several fuel auctions. The Centre has permitted states to utilize up to 25% of their captive coal reserves to meet rising domestic demand.

Coal stocks at more than 100 thermal power plants in India have slipped below 25% of the required level. The primary cause of coal scarcity is rising power demand. The power ministry has initiated a slew of measures such as asking states to import coal, giving tariff relief to enable imported coal-based power plants to switch on, allowing tolling of states’ quota of supply from Coal India, and extending diversion of such coal to more efficient plants for three years for optimum use of coal. While the Centre considers stockpiling imported coal, higher coal prices make this impossible. The railways have come forward to meet the challenge by giving priority to coal movement and making more rakes available.

Thank you.

Regards,

Kishan Mashru,

Kautilya,

IBS Mumbai.