Acute Power Crisis Looms Over India During Festive Season As Coal Inventories Hit Critically Low Levels

New Delhi, October 5: India may be staring at an acute power crisis this festive season with half of the country's thermal power reducing generation, as coal inventories hit critically low levels while surge in power demand post the Covid-induced lockdowns is not being supported by record global prices of fuel that has shot up more than three times in just over a couple of months.

Over half of the country's 135 coal-fired plants are sitting on coal stocks of less than three days, while in others as well, fuel inventories are well below the stipulated 22-day stock, data from the Central Electricity Authority showed. The situation is critical for state-run power generation units where poor financial condition of utilities has prevented them from proper stocking of coal. Punjab Power Crisis: 'Supplying Minimum 8 Hour Power Daily to Punjab Farmers', Says PSPCL Official.

"Global developments are now having a play in the Indian markets too. Sharp uptick in economic activity with the easing of the Covid pandemic has pushed up power demand with major industrial states such as Maharashtra, Gujarat and Tamil Nadu seeing demand rising between 14 per cent and 20 per cent in the last three months," said a power sector analyst from one of the four big audit firms.

"To meet this demand, additional coal is required. The production from Coal India is low now, as monsoons have just ended when the production is typically low. Imports are not an option, as global prices have touched historic high levels," he added.

The development in the Indian market is a reflection of what is happening globally. Like in India, increased vaccinations and lowering ring of Covid scare have scaled up industrial activities, taking economies from Europe to Asia to a situation where demand has outpaced supply, resulting in energy shortages.

For India, the competition in the global coal market is coming from China, the world's largest coal consumer. Large scale shortage in China has meant that it is going on a coal hunt worldwide to address the energy crisis at home.

This has pushed up coal prices from all major suppliers, with the price of Indonesian coal (5,500 Kcal) shooting up to over $100 per tonne from just about $50-60 per tonne a few months ago, while Australian non-coking coal has touched a price of over $200 per tonne.

What the high global coal prices has done is that it has prevented domestic generation companies from buying coal abroad to meet the local rise in demand.

In fact, several of the country's imported coal-based power projects have also reduced generation rather than supporting production through expensive buys. As per a Crisil study, in April-July, non-coking coal imports by the power segment were at the same level as in fiscal 2021, and down 37 per cent compared to fiscal 2020.

The situation of fuel is particularly grim for non-power sector users, leaving players with stocks for 4-5 days only. Dispatches from CIL and SCCL were down 1.5 pert cent at 64 MT compared to 65 MT dispatched in April-August of fiscal 2020.

As the demand rose, spot e-auction premiums for August 2021 increased to 74 per cent compared to 30 per cent in the first quarter of this fiscal and 25 per cent in fiscal 2021.

"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," Crisil said.

"Coal inventory at thermal plants will improve only gradually by March mext year. For this fiscal, it will hover around 10 days compared to the two-year average of around 18 days," it added.

This would mean that the crisis would continue through the festive season with Coal India scrambling to meet the rising demand for fuel in the absence of support from imports.

(The above story first appeared on LatestLY on Oct 06, 2021 12:08 AM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).