HomeBusinessStates are running out of power despite India producing record coal

States are running out of power despite India producing record coal

NEW DELHI: A post-pandemic surge in manufacturing has spiked demand for power and caught power producers off guard to the point that India is staring at a major power crisis.
Several states such as Delhi, Gujarat, Punjab, Rajasthan and Tamil Nadu claim a coal shortage is impacting power generation, despite India producing record amounts of coal.
The shortage in Maharashtra has led to shutdown of 13 units at 7 thermal plants that supply to state-run power utility company Maharashtra State Electricity Distribution Company while the Delhi government has said that the three plants that supply coal to the national capital have stocks for only one day.
The coal ministry, however, has reiterated that fears of a ‘blackout’ and ‘power disruption’ are entirely misplaced” and that India has enough stocks to meet the coal demand at thermal power plants.
The government has asked power generator NTPC to provide distribution companies in Delhi with the full capacity of power declared in the power purchase agreements.
Over the weekend, Tata Power asked Delhi consumers to use power “judiciously”, citing depleting stocks, stoking fears of power cuts and blackouts across the capital.
Outages were reported in other states too. Punjab has been experiencing power cuts of around 3-4 hours each day, while Tamil Nadu Generation and Distribution Corporation (Tangedco) suspended power in several parts of Chennai due to maintenance work, which is likely due to the shortage of coal in the city.
Rajasthan is cutting power for an hour daily to ensure coal is not exhausted due to shortage.
Unscheduled power cuts have become routine in Andhra Pradesh while the Telangana government has stated that they have just enough coal for ten days. In fact most power stations have only 3-4 day’s of coal, way lower than the government guidelines of a minimum 14-day supply.
A “panic has been unnecessarily created about coal shortage” due to miscommunication from GAIL and Tata, said Union minister for power RK Singh: “We have sufficient power available… We are supplying power to the entire country. Whoever wants, give me a requisition and I will supply them.”
Coal minister Pralhad Joshi blamed coal shortage on increase in the international price of coal and heavy rainfall in the country.
Chief ministers of Delhi and Andhra Pradesh had earlier written to Prime Minister Narendra Modi seeking an immediate increase in the supply of coal and gas to power plants in their states.
A Reuters analysis shows “India’s power shortfall in the first seven days of October was over 21 times the deficit in the same period last year, and more than four times of that in 2019.”
While Jharkhand recorded a power deficit of 18%-24%, power supply to Bihar and Rajasthan was between 6% and 17% below requirements.
Why are we running out of power?
* Unprecedented increase in demand for electricity
As India’s economy picked up after the second wave, demand for power shot up but production did not.
Electricity consumption has jumped almost 17% in the last two months alone compared to the same period a year ago.
Coal India, which is still the predominant supplier of coal, could produce the same amount of coal in the first six months of FY22 as it did in the same period a year ago.
The daily consumption of electricity has crossed beyond 4 billion units per day.
Point to note: Coal India alone accounts for 83.26% of coal production in the country. And dispatches are up 20.6% year-on-year for the April-September period but we are still unable to meet the demand.
As Dhiraj Nayyar, chief economist at Vedanta pointed out in today’s edit, “the legacy of nationalisation and the long monopoly of government-owned Coal India Limited have resulted in adequate exploration and mining of the mineral.”
* Imported coal prices shot up
Not only has demand risen but the price of global coal prices also increased by 40%. India’s imports fell to a two-year low level, resulting in reduction in power generation from imported coal-based plants.
Prices surged from $50 per tonne in August 2020 to over $200 per tonne in October 2021, making it unviable to import at these high prices since power producers cannot pass on these higher costs to power distribution companies.
Point to note: Coal generates 70% of India’s electricity. And despite being the fourth-largest coal reserve globally, India is the second-largest coal importer in the world. And due to a dip in imports, power plants that usually rely on imports have now turned to Indian coal, which is adding even more pressure to already stretched domestic supplies.
Imported coal-based power plants are now generating less than half of their capacity due to record high rates.
For instance, Tata Power has been forced to stop power generation from its coal-based power plant in Mundra, Gujarat and Adani Power is facing similar problems at its Mundra unit.
Eight power plants in Uttar Pradesh have reportedly stopped production. Jharkhand, Bihar and Andhra Pradesh are in the same boat.
* Heavy rains in September impacted production and dispatch
Add to this the monsoon problem. This year rains were heavier and longer than usual, continuing well into October, which makes extraction and transportation of coal from mines even tougher.
Rains have hit movement from mines to power generation units, impacting power generation in many states, including Gujarat, Punjab, Rajasthan, Delhi and Tamil Nadu.
Nomura warns
For now, the government says it is working with state-run enterprises to ramp up production and mining to reduce the gap between supply and demand.
Nomura has already cautioned that if power outages become more widespread, then industrial output could suffer while higher energy costs may squeeze firms’ margins and add to inflation.
“With power demand likely to rise from a continued economic normalization and upcoming festive sales, supply-side disruptions pose an important downside risk to growth momentum in the near term,” Nomura said.

RELATED ARTICLES

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Most Popular

Recent Comments