India stares at power crisis as thermal plants run out of coal

India is grappling with an acute shortage of coal with at least 72 coal-run power plants having fuel stocks of less than three days as of October 1, even though they are mandated to stock at least two weeks’ worth of fuel.

Similarly, 50 plants have stocks between four to 10 days, while 13 other units have coal stock for 10 days (as of October 1), the Central Electricity Authority (CEA) has said.

As of September 29, 16 of India’s 135 coal-fired power generators had zero coal stocks. While over 80 per cent had less than a week’s stock, half of them had stocks to last less than two days.

Full View

Why stock levels have gone south

The depletion in coal stocks is being attributed to a sudden increase in demand for power in India, especially after the revival of businesses after the second wave of the COVID-19 pandemic.

“Power consumption for the period August-September has progressively increased from 106.6 BU per month in 2019 (non-COVID year) to 124.2 BU per month in 2021. During this period the share of coal-based generation has also increased from 61.91 per cent in 2019 to 66.35 per cent in 2021. As a consequence, total coal consumption in the month of August-Sept, 2021 has increased by 18 per cent in comparison to corresponding period in 2019,” a power ministry official told LiveMint.

Almost all the states and union territories have reported an increase in demand for power supply in August 2021 compared to the same month of the previous year, shows official data.

 

Full View

The monthly power consumption report by the National Load Dispatch Center shows the positive trend in power supply demand of the country. Heavily industrialized state – Maharashtra – has reported the highest increase in demand which is a 34.5 per cent increase compared to August 2020. The state had a demand of nearly 18,000 mega watt last year which has gone up to 24,000 MW in the current year. It is followed by Gujarat with a 31 per cent increase and Odisha with 27.6 per cent increase in power demand, according to the data. Arunachal Pradesh, Andhra Pradesh and Rajasthan are three other states that have reported an above 20 per cent increase in demand. Only four states and union territories reported the negative growth or decline in power demand. These are Telangana, Sikkim, Ladakh and Jammu and Kashmir. Their drop is merely less than one per cent.

Hiccups in coal mining and delivery due to heavy rains in September and a rise in prices of imported coal also incapacitated coal-powered units from generating sufficient electricity to meet the surging demands.

Also read: What caused coal crisis in India & how can it affect you?

Several Indian power generators had cut down on coal imports due to the surging international coal prices.

Coal India Limited, which produces 80 per cent of India’s coal, on September 29 said that a record rise in global coal prices and freight costs forced power plants dependent on imported coal to cut down on power production, “adding to the pressure on utilities using domestically mined coal to ramp up output”.

CIL also said that the coal crisis could have been averted if thermal power generation plants had maintained the 22 days fuel stocks prescribed by the CEA.

That apart, the economic impact of the pandemic has also affected the investment in the power sector. Reports say the pandemic led to a fall in investment of 15 per cent in the energy sector in 2020.

CIL has been blamed for failing to meet annual targets to keep up with the surge in demands. Despite a rise in international coal prices, CIL, had kept domestic coal prices steady over the last year, as an increase in coal prices would directly affect power prices and inflation. While the company has said that it will revise domestic coal prices, the same has not been done yet.

The crisis comes at a time when the neighbouring China is already struggling with a power crisis which caused its manufacturing sector to suffer its first contraction since the beginning of the pandemic, last month. Under pressure to ramp up its resources, China has ordered state-owned power companies to secure fossil fuels supplies to tackle shortages in the winter. A Bloomberg report said China’s power crisis may encourage it to look for a wider range of coal producers across the globe, putting it in competition with both European nations and India.

How will the crisis affect common man?

 The coal shortage raises apprehensions of power cuts, higher electricity bills and a hit to the balance sheets of power units. CRISIL in a recent report, said the supply crunch is there to stay and importing coal – albeit at steeper prices – is the only option to meet demands as coal inventory at thermal plants will revive only by March 2022.

“In our view, coal inventory at thermal plants will improve only gradually by next March. For this fiscal, it will hover around 10 days compared with the two-year average of around 18 days,” the CRISIL report said.

Anticipating that stock levels will run low for a while, the Power Ministry has asked thermal companies to replenish stockpiles.

CIL has also assured to ramp up fuel supply to the coal-powered plants including sourcing coal from captive coal mines.

Also read: This is how TANGEDCO is producing energy this year without burning coal

According to LiveMint, while the demand for coal for the power sector is expected to touch 700 mt this year, the same is predicted to reach 1,123 mt by 2023.

However, given the inability of CIL to provide the required domestic supply of coal, experts say the prospect of power cuts and rise in electricity tariff is very likely. They anticipate India, with its huge population and underdeveloped power infrastructure, may see a longer power crisis than anticipated. Any efforts to ramp up coal supply to meet power demands will come at a high cost with a majority of India’s coal suppliers having hiked their prices. Indonesia for instance, has increased the price of coal from $60 per tonne in March to $ 200 per tonne in September. Similarly, Australia’s Newcastle’s coal prices have risen by around 50 per cent in the past three months.

According to Bloomberg, officials, however, have assured that large-scale power outages like those seen in China are unlikely in India while some places may witness power cuts.

(With inputs from Akash Chandrashekhar Gulankar)