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India’s power sector is in the middle of a perfect storm as its coal-fired power plants, responsible for generating 70 percent of India’s electricity, face a shortage in coal stockpiles.
Typically, industrial and domestic power consumption hits peak levels as India enters the festival season in October. Higher power consumption provides the opportunity for India's economy to grow at a faster pace and bounce back to pre-COVID-19 levels.
However, due to the coal stockpile shortage and the potential power crisis, it seems that the Indian economy’s rebound may be stalled a while longer.
But how critical is the shortage? Will there be power cuts? We explain.
Out of the 70 percent electricity generated by coal-fired power plants in India, nearly three-fourths is generated using domestically mined coal, while the remaining quarter of energy is produced using imported coal.
As economies open up in the rest of the world, the demand for importing power-generation fuels, such as coal, has risen.
This rise in demand has corresponded with a significant global price rise for coal.
Since imported coal has become expensive, there is an added pressure on power plants that use domestically mined coal.
For instance, out of India’s total coal production of 716 million tonnes (MT) in 2020-2021, CIL had produced 596 MT.
India’s coal secretary, Anil Kumar Jain stated that currently, deliveries to power plants are short by between 60,000 and 80,000 tonnes a day.
This added burden (due to a decreasing dependence on imported coal) is despite the fact that production of coal in India in the six-month period of April to September 2021 has increased to 315 MT from 282 MT last year same period, showing an increase of almost 12 percent.
Though power shortages are already emerging, while the gap between available electricity supply and peak demand widened to more than 4 gigawatts on Monday, 4 October, according to government data from power ministry, it is unlikely that power generation plants will completely run out of fuel.
Union Power Minister RK Singh recently said in an interview that in relation to the current level of coal stocks, the situation is way “beyond” normal, The Indian Express reported. He added that the shortage might last for the next five to six months.
“We are meeting the entire demand of the country and the demand is increasing,” Singh was quoted as saying by NDTV.
According to CIL, thermal power plants are to be blamed for the crisis.
Coal stocks plummeted since August because power utilities allowed them to, a person aware of the development told Hindustan Times, and added that the matter was flagged to appropriate authorities.
CIL said in a statement that coal stocks were at a comfortable level of 28.4 MT at the beginning of the financial year.
CIL was quoted as saying on 29 September, “Had the power utilities maintained the CEA-prescribed normative stock of 22 days the low coal stock situation could have been averted,” Hindustan Times reported.
Pushing for higher domestic production of coal, the Mines and Minerals (Development & Regulation) Amendment Act was amended to this effect.
Objecting to the reports of the shortage, Chhattisgarh-based lawyer Sudiep Shrivastava said in a series of tweets, “Please don’t buy government leaked or planted stories about massive coal shortage in power plants. It's a trap to set narrative to amend Coal Bearing Area (Acquisition and Development) Act 1957, in favour of private coal miners in next session.”
Peak electricity demand had recorded an all-time high of 200.57 gigawatts (GW) on 7 July, the power ministry had informed.
Mentioning the rising generation capacity of solar and hydel energy (90,000 MW) and 39,000 MW from wind energy, he adds that India could need around 1 lakh MW from coal thermal power plants, which would loosely require 500 million tonnes of coal in a year, as recommended by the CEA.
The pandemic had led to a fall in investment of 15 percent in the energy sector in 2020, Power-Technology reported.
This worsened the financial strain within India’s electricity distribution companies, due to which the power ministry is now asking power companies to build up stockpiles.
The Bill, once passed, will exempt private players from conducting social impact assessments, from obtaining consent of the majority of population and from paying adequate compensation to affected people before land is acquired for coal mining, Newsclick reported.
Further, provision of the land acquisition bill enacted in 2013, popularly known as LARR Act, 2013, will no longer apply to corporates when they begin mining coal from lands acquired through bids.
Srivastava adds that along with the “draconian” Bill, dilution of environment and forest norms for coal mining will also take place.
Power rationing could be an easy solution for the government if the situation arises; though it will further hamper economic growth.
Government ministries and industry also have the option to again divert supplies away from industrial users, such as aluminum and cement makers, to prioritise power generation, avoiding power cuts.
But again, non-power sector companies will be left with the option to either curb output or pay high prices for imported coal, Bloomberg reported.
Global analytics company CRISIL said, "In the near term, the supply crunch is expected to persist with the non-power sector facing the heat as imports remain the only option to meet the demand, but at rising costs.”
Withdrawing from fears of a potential energy crisis, it added, "Coal inventory at thermal plants will improve only gradually by March next year. For this fiscal, it will hover around 10 days compared to the two-year average of around 18 days."
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Published: 07 Oct 2021,04:03 PM IST