What’s the news?

• As per the latest data, coal stocks at more than 100 thermal power plants in India have fallen below 25% of the required stock (critical mark).
• In more than 50 thermal plants, the stock has fallen below the 10% mark, leading to States seeking additional coal supplies from India’s sole coal producer Coal India Ltd (CIL).

News in detail

• Central Electricity Authority (CEA) data shows that as of 2022, India’s power generation via thermal plants using domestic coal stood at 182.39 GW with an average of 34% coal stock in them. Meanwhile, 16.73 GW was generated by power plants using imported coal with an average coal stock of 34%.
• Nine thermal plants with the capacity to generate 3.56 GW are currently non-functional.
• Of the 173 thermal power plants, 85 plants fired by domestic coal have less than 25% stock while 11 plants running on imported coal have hit critical levels.

Why does India face a Coal Shortage? 

• The biggest reason for coal shortage is the increasing power demand. In 2021, demand increased to 124.2 BU per month from 106.6 BU per month in 2019. In 2022, the demand has further increased to 132 BU.
• Centre’s core management team (CMT) stated that the heavy rains in coal mining areas like Gujarat, Punjab, Rajasthan, Delhi and Tamil Nadu had resulted in lesser coal production.
• Moreover, prior to the monsoon season, there was inadequate coal stock build-up in most thermal plants, pushing them below critical levels.
• The Centre also stated that there was a 43.6% reduction in power generation from imported coal, which led to extra demand of 17.4 MT of domestic coal, further depleting coal reserves.

How will coal shortage affect power supply and cost?

• As per Fitch, the daily electricity deficit in India has increased from 0.3% to 1% in April 2022. This has led to an 85% increase in the price of electricity traded on Indian exchanges from an average of Rs 3/kWh to Rs 8.23/kWh in March.
• Fitch further estimates that low coal supplies will not allow National Thermal Power Corporation (NTPC) to increase its plant load factor to its power output with respect to its fuel by more than 70.7%. This was the limit NTPC had increased its load to in 2021, up from 66% in 2020.
• The peak in demand has been met with load shedding, planned outages by States like Andhra Pradesh, Gujarat, Maharashtra, Jharkhand, Bihar, Haryana and Uttarakhand.
• Eg: Since April 1, Jharkhand has been facing an average supply shortage of 10-12%, followed by Andhra Pradesh (10%), Uttarakhand (8-10%), Madhya Pradesh (6%) and Haryana (4%).

How does the Centre plan to fix the coal crisis?

• The Centre has allowed States to use its captive coal reserves up to 25% to meet growing domestic demand.
• It has also allowed generating companies to blend imported coal up to 10% to ease the burden on CIL.
• In 2020, Centre had passed mining reforms to end CIL’s monopoly on India’s coal manufacturing.
• The law allowed commercial mining in the coal sector with 50 blocks to be offered immediately. It also allowed any party to bid for coal mines instead of only captive consumers (i.e companies which use coal for running their businesses).
• The law also incentivised early coal production with rebate in revenue share and promised Rs 50,000 crore investment for diversifying CIL’s operations which had run into severe Opposition from States especially mineral-rich states like Jharkhand, Bihar citing that this will have an adverse impact on a large tribal population and forests. The case is pending in the Supreme Court.