POWER SHORTAGE IN INDIA: AN EMERGING TENSION OR SUPERFLOUS PANIC?

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By Ambika, Kalindi College

With its coal-fired power plants running extremely low on coal, India has found itself in the middle of a power crisis. The worsening horde on India’s coal supply pursues to trigger this power crisis further by creating an alarming effect on the world’s fastest expanding major economy.

According to the Central Electricity Authority (CEA), an average of 3 days stock is left in half of the coal-fired power plants. 16 out of 135 coal-fired power plants had 0 coal stock. More than half of the plants are observant for outages. While utilities make up for about 75% of India's coal consumption, coal is believed to account for 70% of India's electricity output.

India's industrial capacity demand has rushed after the second wave of Covid-19 pandemic. In the first 8 months of 2021 the country's power demand increased by 13.2%.

Imports of coal become more costly as there is a broad price gap between lower domestic prices and huge global coal prices that has led buyers to shut imports. Domestic coal prices in India are mainly determined by Coal India. An increase in coal prices normally has a consequence on power prices and inflation. Coal India kept prices firm over the last year in spite of global coal prices rising abruptly in the same period. The company's chairman confirmed the prospect of an increase in the price by the miner but it is not straight away clear when it will happen. Meanwhile, standard coal prices in Asia continue to hit high records as the economies open up causing the global demand for power generation fuels to rise further.


Image Credits: infroshri.com


China is the biggest producer of coal. With its domestic industries facing a power crisis, China has put restrictions on the export of coal and is competing in the global market for imported coal.

India continues to be at the 4th spot for having the largest reserves in the world and it also comes second in being the largest importer, consumer and producer of coal. Its imports mainly come from countries like Indonesia, Australia and South Africa. After the international coal prices reformed over 40% to all-time highs, India's average weekly coal imports during August through late September dropped by more than 30% average with just under 3 million tonnes for the initial seven months of the year.

The smallest import total of less that 1.5 million tonnes was reported in the most recent weeks as the major coal importing state utilities sites didn't show any new tenders seeking consignment this month. India's power generators cut down on coal imports in recent times as global prices surged due to global demand from Europe as well as China.

The coal extremity in India comes as the result of a global energy crunch which promoted a sharp outflow in demand across Europe, China and elsewhere. The opening up of economies after unbroken lockdowns and restrictions is beginning to test supply chains. Heavy rains at several coal-mining areas in the country and the resulting planning issues delayed plants in spreading their stocks.

Large scale power cuts and higher consumer electricity prices would remain affected if this scenario of scarcity of coal persists for long. Coal India should manage to increase supplies enough by the second week of October to balance the shortage at power plants, although that will depend on the weather conditions. However, it will take much longer to refill the badly exhausted stockpiles.

The government of India has clarified and reassured the public of sufficient coal supply, however, if the situation persists for a longer period of time, the country will have to face dire consequences.

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