Coal Shortage: Is India heading towards a Power Crisis?

A large part of the country is staggering under the grip of a fierce heatwave propelling India towards a national power crisis. Many States across the country are anticipated to face coal shortages. This scenario leads to power shortages in the coming weeks, with India incoming the peak power demand season from April to October. Experts predict that high global thermal coal prices and below-normal imports will worsen the crisis.

In fact, despite high coal production, thermal power plants in India are suffering from depletion. The coal supply shortage is playing out at a time when power demand is increasing and is expected to reach the July 2021 peak power demand of over 200 GW. The daily peak power demand for Q4 FY22 averaged 187 GW. During April 1-12, the average daily peak demand was more than 194 GW.

Prices in spot markets are also at multi-year highs. The market-clearing price (MCP) at the Indian Energy Exchange (IEX) in FY22 stood at around ?4.4 per kilowatt-hour (kWh), which is the highest in the last ten years.

The All India Power Engineers Federation (AIPEF) stated that the country is looking at a power crisis as the coal-fired thermal power plants are not getting the required amount of coal due to shortages. If India cannot meet the coal supply for electricity production, it will have to face a lot of issues.

What is the reason behind crisis?

Power plants in India having low coal supplies are not a new sensation. The shortage happens almost every year, and the government, despite its various measures, has not achieved in overcoming the concern.

The depleting coal supplies at thermal power plants are the centrepiece of India’s power sector and have resulted in this problem. Coal-based power generation, around 210 GW of the total 396 GW, accounts for about 53 percent of India’s total power capacity as of March 2022.

Professionals anticipate that depleted coal reserves at power plants will lead to power outages, a scenario that played out in September-October 2021. Due to high need and interruption in coal supply mainly due to heavy rains, the coal stock at power plants fell sharply, leading to power outages in several States. With concerted efforts of the government, the reserves rose to levels that are acceptable for an average of 10 days at 85 percent of the plant load factor (PLF), or put, capacity.

How serious is the coal shortage and what are the steps taken by government to solve this problem?

The concern at thermal power plants is worsening consistently and has earned critical levels. As per the National Power Portal, 11 imported coal-based (ICB) power plants had required stocks as of April 13. Similarly, 79 domestic coal-based power plants were encountering critical stocks of the key commodity on the same day. Again, on April 13, of the total 173 coal-based power plants, the total stocks available were 23.17 million tonnes (MT) against a daily requirement of 2.76 MT. The stocks at this level will last for less than nine days.

First, the government has issued adjusted coal stocking norms, which direct the power plants to maintain sufficient stocks; if required, through imports for combination to meet any contingent situation. Besides, an Inter-Ministerial Sub Group with senior officials from Ministries of Power, Coal, Railways, CEA, CIL, and SCCL meet regularly to take diverse operational conclusions to improve the supply of coal to thermal power plants.

Power Ministry has notified power plants to import about 36 MT of coal for blending during 2022-23 to build adequate coal stock in Power Plants. The Ministry also has a Core Management Team to provide tight monitoring of coal stocks at thermal power plants. Operational decisions are being carried out in CMT to increase the supply of a sufficient quantity of coal to the TPPs.

States such as AP, Maharashtra, Gujarat, Punjab, Jharkhand, and Haryana are examining potential power issues, with Gujarat and Maharashtra declaring load shedding. The Centre has asked states to import coal for up to 10 percent blending to trade with the present crisis. Stakeholders have also blamed state power discoms for not getting their reserves up in line with future demand.

"The concern is, even after Coal India and the coal ministry kept questioning power plants to stock up, the utilities kept lowering their inventories," Rajiv Agarwal, secretary-general of the Indian Captive Power Producers Association, told last week.

Why is this crisis frequent every year?

At the heart of the subject is the lack of planning and coordination between various ministries concerned in the process — the Power Ministry, Coal Ministry, and Railways. While the Coal Ministry accuses the Indian Railways of the non-availability of adequate rakes, the Railways have pointed out Coal India's mismanagement in loading and unloading rakes.

Despite the high coal production and despatch by CIL and additional PSU miners, the supply at power plants has still not reached above 15 days in the last six months, and a lack of coordination and strategy is to be condemned for this.

India needs a significant amount of coal at all times to ensure an uninterrupted power supply. Still, as electricity needs peak before the season, thermal power plants have had to fall into their insufficient coal reserves to continue their power generation. Power generation demand hit a 38-year-peak in the first two weeks of April. As a consequence, the power shortage in India rose to 1.4 percent. During the coal shortage crisis in October, the power deficit was only 1.1 percent.