India Has Only 4-Days Of Coal Reserves Left: Power Crisis Ahead For Entire India?

More than half the plants are on alert for outages.

India is facing a power crisis due to worsening coal supply which could pose a major threat to its thriving economy.

Coal-fired power stations had an average of four days’ worth of stock of the fuel at the end of last month.


Deficit And Rising Costs

More than half the plants are on alert for outages.

Supplies to power plants are currently short by between 60,000 and 80,000 tons a day.

Spot power rates have surged since coal is used to produce almost 70% of electricity.

Average spot power prices at the Indian Energy Exchange Ltd. jumped more than 63% in September to 4.4 rupees ($0.06) a kilowatt hour.

Economic Growth At Stake

Rising electricity bills will likely hamper the economy’s growth rate which is forecast to expand 9.4% in the year through March 2022.

This would make India the world’s fastest-expanding major economy.

Supply is being diverted from key customers including aluminum smelters and steel mills.

Aluminum producers, a major power user, had raised a complaint against state-run miner Coal India Ltd for halting fuel supply to prioritise electricity generators.

Facets Of The Crisis

India is facing a similar situation as China with two major pain points.

One, high demand as industrial activity recovers post lifting of pandemic curbs.

Two, low supply due to slump in local coal output.

According to government data, coal inventories at Indian power plants fell to around 8.1 million tons at the end of September, about 76% less than a year earlier.

Heavy Rains Dampen Supply

India takes care of around three-quarters of its own demand but with heavy rains mines are drenched and key transport routes are flooded.

Dhanbad, a major coal mining center, suffered unusually heavy downpours which has contributed to the spiraling of the crisis.

What Are The Options?

Operators of coal-fired plants now find themselves between a rock and a hard place. 

They can either secure any available local supply at the cost of large premiums at domestic auctions.

Or, they must enter a seaborne coal market where prices have soared to the highest on record.

For now, the government is preparing for the eventuality that it may have to bring idle power stations back into action.

What About The Average Citizen?

The common man suffers from this crisis because of more and more power outages in the future.

They may also have to start paying more for power.

This is because of soaring prices of imported coal and plants running on domestic coal having to do a lot of heavy-lifting.

The price hike won’t be immediate but could come after a few months when distribution utilities get permission to pass on the cost burden.

No More Green Goals?

The situation also serves as a stark reminder of the Indian economy’s dependence on coal even with growing adoption of renewable energy sources like solar.

Even as the world is starting to take the climate crisis more seriously, India still lags behind considering that coal consumption is forecast to increase in the next few years.

India, among the world’s top greenhouse gas emitters, is yet to set a target to get to carbon neutrality.

Silver Lining

The good news is that as the rains recede, things could potentially get better. 

If weather permits, Coal India should be able to increase supplies enough by the second week of October to cover the deficit at power plants.

But it will still take longer to replenish the badly depleted stockpiles.

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