Global coal prices set to rise as Indian states go shopping amid power shortage

India’s imminent power crisis is fuelled by a significant shortage of coal which has compelled Maharashtra, Tamil Nadu and Gujarat to import 10.5 million tonnes of coal in the coming months.

As India’s demand soars and the Ukraine-Russia war seen no signs of abatement, the prices of global coal are likely to go through the roof.

Brazil and South Africa, major producers of coal, are likely to make a windfall as India — world’s second-largest coal importer — goes shopping. However, European Union’s restrictions on Russian coal means Brazil and South Africa are already strained with the global demand rising steadily.

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India’s power utilities are struggling as their stocks dwindle at an unprecedented rate with demand for power rising at the fastest pace in at least 38 years, reports Reuters.

The Central Electricity Authority stated that 100 of the country’s 173 thermal power stations’ coal-stock situations are critical as of April 18. Collectively, these plants had 22.52 metric tonne coal stock against the normal stock of 66.72 metric tonne.

Maharashtra has placed an order for 8 million tonnes of coal, which is in addition to 2 million tonnes it had already ordered. The first delivery is expected on May 8. Maharashtra has about 5 days of coal stock left.

Gujarat will place an order for 1 million tonnes of coal next week. The highly industrialised state also has five days of coal stocks left.

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Tamil Nadu had placed orders to import 1.5 million tonnes. It has about two days of coal stocks left.

In fact, the Centre has asked the governments of Karnataka, Uttar Pradesh, Madhya Pradesh, Punjab and Haryana to import a total of 10 million tonnes of coal.

The National Thermal Corporation Limited (NTPC), the country’s top electricity producer, already has big plans to import coal to an extent not observed in last eight years.

Reuters reported that the government is set to invoke an emergency clause in the country’s electricity law that will permit idled power plants designed to run on imported coal to pass on higher costs to distribution companies. The move would facilitate operation of plants run by Adani Power, Essar Power, CLP India and IL&FS Tamil Nadu.