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). 70% of India’s power demand is met by thermal power plants, which are mostly powered by coal.
- The biggest reason for coal shortage is the increasing power demand.
- Heavy rains in coal mining areas like Gujarat, Punjab, Rajasthan, Delhi and Tamil Nadu had resulted in lesser coal production.
- Plants have lowered imports as a result of a constant drive to reduce imports combined with high worldwide coal costs.
- The electrical usage also increased as part of the world’s largest household electrification effort, the Saubhagya initiative.
- Non-payment of coal dues: India’s power tariffs are among the lowest in the world, controlled by the individual states. To keep rates stable, state-run distribution corporations have absorbed rising input costs. As a result, many of these businesses are severely in debt, with liabilities totaling billions of dollars. The firms’ tight balance sheets have regularly resulted in delayed payments to power producers, impacting cash flows and discouraging future investment in the industry.
- The present coal scarcity is the result of the economy’s recovery from the Covid-19 outbreak, as well as supply concerns.
- If industries encounter electrical shortages, India’s economic reopening may be delayed.
- Some businesses may seek to cut output.
- Electricity shortages in industry may cause India’s economic recovery to be delayed, since enterprises may be compelled to downscale their operations.
- Power spot rates increased by more than 63 percent year on year in September, averaging Rs 4.4 ($0.06) per kilowatt hour and reaching as high as Rs 13.95.
- Impact on the result of the COP26 meeting in Glasgow: The major expectation was that the recent success of renewable energy would allow countries to accelerate their transition away from high-emission fossil fuels like coal. It’s difficult to see how news of an economic rebound impeded by a coal scarcity in the world’s two largest growth engines can assist in reaching a consensus in Glasgow.
- Impact on inflation: If the coal scarcity persists and corporations begin importing costlier coal, the cost will be passed on to consumers. This would have an inflationary effect on top of the already high rate of retail inflation.
- Impact on steel: As coal prices rise, so will steel prices, which may also climb as a result of this extraordinary spike. Steel producers utilise coal as a source of energy to operate their operations and create steel using the direct reduced iron (DRI) process.
- The power crisis might last for a long time, given India’s population and poor energy infrastructure.
- Ramp-up Mining: The government is closely monitoring stocks, and state-owned Coal India and NTPC are striving to increase mine output to enhance supplies.
- 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.
- Rationing residential electricity supply, particularly in rural and semi-urban regions, may prove to be one of India’s most simple remedies. When generation falls short of demand in India, power distributors normally limit supplies to certain areas on a cyclical basis, and an extension of load-shedding would likely be considered if power plants take any more knocks.
- Hydro-Power Production: The same monsoon rains that swamped coal mines are expected to increase hydro-power production. After coal, large hydro-electric projects on dams are India’s main source of power, and the industry peaks around the rainy season, which lasts from June to October.
- In 2020, Centre had passed mining reforms to end CIL’s monopoly on India’s coal manufacturing. The law allowed commercial mining in 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).
- Turn to Natural Gas-Powered Generators: Despite recent worldwide price spikes, natural gas may have a bigger role to play. In a pinch, the gas-powered fleet may save the day by preventing widespread power disruptions. NTPC Ltd., for example, is a state-run generator with idle capacity that can be cranked up in roughly 30 minutes if needed and is connected to the gas grid.
How to structure:
- Give an intro about India’s coal dependence- give statistics
- Give the cause for India’s coal shortage
- Examine how it affects India’s power supply
- Suggest innovative measures