India needs to quickly resolve its coal shortages, or face prolonged power cuts like China
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- What went wrong: India's total installed electricity capacity was 388.1 GW (Sept 2021), of which 235 GW was thermal based. India’s thermal power plants faced a severe coal shortage, with coal stocks having down to an average of 4 days of fuel across more and more thermal power stations. China has experienced major power outages in recent weeks already, due to emission control norms being enforced haphazardly.
- Details: Coal fired plants makeup nearly 70% of India’s power source mix. On October 4, 16 thermal power plants with a power generation capacity of 17,475 MW (mega watts) had zero days of coal stock. An additional 45 thermal power plants with a power generation capacity of 59,790 MW had coal stock only for up to two days. It is way below the government recommendations of holding 14 days worth of coal stock. The non-pithead plants or plants which are not located close to coal mines have critical levels of stock i.e under 8 days.
- Shortage: Many reasons contributed to the trouble.
- Increased power demand - A sharp uptick in power demand as the economy recovers from Covid-19 pandemic coupled with supply issues have led to coal shortage. India consumed 124 billion units of power in August 2021 compared to 106 billion units of power in August 2019.
- Supply crunches - Lower than normal stock accumulation by thermal power plants in the April-June period is another reason. Continuous rainfall in coal bearing areas in August and September caused fewer despatches of coal from coal mines.
- Fall in imports – There has been sharp fall in imports due to high international prices.Non-payments of coal dues - The non-payments of coal dues by States such as Maharashtra, Rajasthan, Tamil Nadu, Uttar Pradesh and Madhya Pradesh also resulted in inadequate supplies.
- Impact: The electricity shortages could delay India’s economic reopening, and might lead to downscaling of business productions. India’s population and under developed energy infrastructure will mean the power crisis could hit long and hard.
- Measures taken: The Power Ministry constituted a Core Management Team to monitor and manage the fuel on daily basis to improve supplies to power plants. Coal India, the state-owned miner claims that it has ramped up supplies to thermal power plants by nearly 12 per cent annually. The government is pressing thermal plants with captive coal mines to boost their coal output to meet their own demand. The Power Ministry is trying to expedite the start of production from a number of mines that already have all requisite clearances. The government has also boosted the number of rakes of coal being transported to thermal power plants daily.
- What next: The State run Coal India and NTPC Ltd. can work together to raise the output from mines. India has to ramp its imports despite the financial cost. Advance preparation and ensuring sufficient stocks ahead of monsoons is a well known strategy.
- Electricity pricing: India's power tariffs, set by the respective states, are among the lowest in the world (globalpetrolprices.com), as state-run distribution companies have absorbed higher input costs to keep tariffs steady. This has left many of these companies deeply indebted, with cumulative liabilities running into billions of dollars. The companies' strained balance sheets have consistently triggered delayed payments to power producers, often affecting cash flows and disincentivising further investment in the electricity generation sector. Indian power producers locked in long-term agreements with distribution utilities often cannot pass on higher input costs unless clauses are included in their contracts.
- Imports: India is the second largest importer, consumer and producer of coal, and has the world's fourth largest reserves. It mainly imports from Indonesia, Australia and South Africa. The import total for the most recent week was less than 1.5 million tonnes, the smallest in at least two years, and websites of major coal importing state utilities did not show any new tenders seeking new cargoes in October 2021.
- EXAM QUESTIONS: (1) Explain the links between energy generation and economic growth, in a developing economy like India's. (2) What measures can the government take to ensure smooth electricity supply in coming months, given the coal crunch today? List and explain. (3) What coal sector reforms were initiated by the government in 2021? Explain.
#Coal #Power #Shortages #Electricity #CEA
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