Lagatar24 Desk
New Delhi, Oct.5: The tightening of India’s coal supply is causing a power shortage that threatens to halt the world’s fastest-growing major economy. At the end of last month, coal-fired power plants had an average of four days’ worth of fuel on hand, the lowest level in years and down from 13 days at the start of August. More than half of the plants are on high alert in case of a power loss.
Spot power rates have risen since coal is utilized to generate over 70% of energy, but supplies of the fuel are being diverted away from critical clients such as aluminum smelters and steel mills.
India, like China, is facing two major challenges: rising electricity demand as industrial activity picks up after epidemic restrictions were eased, and a drop in domestic coal production. Around three-quarters of the country’s demand are met locally, but recent rains have inundated mines and major transportation routes.
Coal-fired power plant operators are faced with a choice: pay hefty premiums in domestic auctions to secure any available local supply, or enter a seaborne coal market where prices have surged to record highs. The government of the country is already drafting guidelines in case it needs to restart idle power plants.
“We are likely to witness power disruptions in some regions until supplies stabilise fully, while customers elsewhere may be forced to pay extra for power. With the price of imported coal skyrocketing, plants using domestic coal have had to perform a lot of heavy lifting. The situation is likely to improve once the rains subside,” said Pranav Master, Director of infrastructure advice at credit ratings agency Crisil Ltd.
He also added that consumer prices would be affected a few months later when distribution utilities receive regulatory authority to pass on the cost.
Even as Prime Minister Narendra Modi promises a massive rise in renewables and the country’s top billionaires hurry to add green assets, the energy crisis serves as a reminder of the critical role coal plays in India’s economy. The demand for the fuel is expected to rise in the coming years, and India, one of the world’s largest producers of greenhouse gases, has yet to declare a goal to achieve carbon neutrality.
According to India’s coal secretary, Anil Kumar Jain, supplies to power plants are currently short by 60,000 to 80,000 tonnes per day as a result of the persistent rains that have soaked coal pits. Last month’s unusually high rains in Dhanbad, a key coal mining centre in the country’s east, exacerbated the issue, he said.
Coal India should be able to expand supplies enough to fill the shortage at power plants by the second week of October, though that will depend on the weather, according to Jain. However, replenishing the severely depleted reserves will take much longer.
