News Analysis: Coal shortage leads to potential energy crisis in India

Source: Xinhua| 2021-10-20 10:19:43|Editor: huaxia
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by Peerzada Arshad Hamid

NEW DELHI, Oct. 20 (Xinhua) -- Last week fears of coal shortage in India triggered an energy crisis-like situation, prompting chief ministers of several states including Delhi to seek Prime Minister Narendra Modi's intervention.

The country's thermal power plants were faced with critically low levels of coal stocks that could trigger outages and thereby impact the South Asian country's fledgling economic recovery.

Alarmed Chief Ministers of Andhra Pradesh, Delhi, Tamil Nadu, Karnataka, Punjab and Rajasthan flagged the issue of depleting coal reserves, warning it could lead to a prolonged power crisis across the country and plunge it into darkness.

The warnings forced the federal government to review the situation with coal and power ministries. The federal government has kept on saying the situation was under control and they have enough coal reserves at hand.

Experts say coal-based power plants in the country have witnessed rapid depletion of coal stocks from 28 days at the end of March to just four days by the end of September this year.

The data provided by Central Electricity Authority (CEA) during the crisis showed over half of the country's 135 coal-fired power plants have a fuel stock of fewer than two days.


India's federal finance Minister Nirmala Sitharaman termed worries about a possible shortage of coal and looming threat of power supplies as "absolutely baseless".

"Absolute baseless. There is no shortage of anything. In fact, if I recall the (power) minister's statement, every power-producing installation has the next four days' stock absolutely available within their own premises and the supply chain has not broken at all," Sitharaman said during her visit to the United States.

Sitharaman described India as a "power surplus country".

The Indian government has assured that the situation will normalize by ramping up coal production. India's union minister of coal Pralhad Joshi recently said coal dispatch to power plants will be further increased to ensure sufficient stock with power plants.


As the economy began to recover from the COVID-19 pandemic lockdown, a sudden demand in coal production, transportation and supply was witnessed, which in turn pushed the coal prices higher at the international level. The prices of imported coal began to soar in India and the power plants that usually relied on imports became dependent on domestic coal supply.

At the same time, inclement weather also contributed to the coal shortage as mines were flooded hampering the supply of fuel to power generation units.

Reports said India's electricity consumption too has risen almost about 17 percent in the last two months from a year earlier.

Had the crisis deepened, Delhi, Punjab, Rajasthan, Uttar Pradesh, Bihar, Jharkhand, Kerala, Tamil Nadu and Andhra Pradesh would have been the worst affected areas. To avoid a total blackout, some of the states had resorted to load-shedding.

India depends on coal to meet over 70 percent of its power needs, and state-run Coal India Limited (CIL) supplies over 80 percent of the total coal required.

The present ongoing coal crisis in India comes at a time of a broader energy crisis across the world, with the prices of various kinds of fuel including coal and oil rising sharply in the international market.

The current crisis in the availability of coal has been the result of lackluster domestic production and a sharp drop in imports over the last few years.

According to BP (British Petroleum) global energy statistics, domestic coal production in India has stagnated since 2018. Last year the stagnating supply did not cause trouble because of the shutdown to contain the COVID-19 pandemic. The rise in power demand this year has exposed the government's inability to push domestic production.


Factors that are being blamed for the insufficient supply of coal this year include short-term issues like flooding in coal mining areas, transport issues, labor disruptions in major coal mining countries and the sudden rise in power demand as the economy revives from the pandemic.

Experts said a combination of factors, operating in tandem, has resulted in this sharp demand-supply disparity.

"The persistent non-payment of coal sale dues by power plants to coal companies has created a serious strain on their working capital position. Some companies were forced to borrow from banks to meet the operational expenses, including disbursement of salaries. According to reports, INR 18,000 crore (2.38 billion U.S. dollars) is currently due to coal producers," wrote Partha Bhattacharyya, former chairman of the CIL in an opinion piece.

Bhattacharyya said the persistent shortage of coal production by the privatized and captive mines forced India to import around 200 million tons of coal.

"Of this, more than 40 percent goes to meet the demands of power plants. A spurt in imported coal prices, mainly due to a major increase in coal imports by China, acted as a brake on imports of coal. This escalated the demand for domestic coal," he said.


The CIL recently announced that it has temporarily stopped coal supplies to its customers from the non-power sector. However, the company assured that this is only a temporary move till the situation stabilizes.

The company said it has stopped all online auctions of coal except those meant for the power sector.

"This is only a temporary prioritization, in the interest of the nation, to tide over the low coal stock situation at the stressed power plants," the CIL said. Enditem