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India’s economic revival has led to an acute coal shortage as electricity demand surged. Coal-fuelled power plants that had only four days of fuel stock as on 4 October account for 43% of India’s installed electricity generation capacity. Mint takes a look.

What led to this situation?

An uptick in electricity demand due to the economic revival after the lifting of curbs, heavy rains in September impacting coal production and dispatch, a spike in imported coal prices, inadequate stocks at power projects, lower generation from other fuel sources and non-payment of coal dues contributed to dwindling supplies. Also, as part of the largest global household electrification drive through the Saubhagya scheme, the electricity load has shot up. Coal India Ltd (CIL) said if thermal power generation plants had maintained the prescribed 22-day fuel stock, the situation could have been averted.

Would there be blackouts?

A similar situation had arisen during September-October 2017. Thankfully, India also has a 24.92 gigawatts (GW) of gas-fuel capacity and another 6.62 GW of lignite plants. Experts say a lights-out scenario may not actually play out. “The situation with respect to critical coal stock in thermal power plants is alarming, but as every agency involved in the fuel supply chain has been activated to respond to this crisis, coal supplies should improve in the next few weeks and India may just manage a large-scale power supply disruption," said Debasish Mishra, a partner at Deloitte Touche Tohmatsu India Llp.

A critical poiny
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A critical poiny

What is Coal India’s production target?

CIL’s annual production target is 670 million tonnes (mt) for the current fiscal year, but is expected to be 740 mt. It started the year with a 99 mt stock and the current coal stock available for supply at CIL mines is 41 mt. There are 64 power projects with less than four days’ stock that are not located near coal mines.

What are India’s options?

India has an installed power generation capacity of 386.88 GW, of which coal accounts for 52.41% or 202.80 GW. “India now has ample under-utilized generation capacities. But as spot liquefied natural gas (LNG) and international thermal coal prices are at an all-time high, large-scale imports will not make sense for end consumers of electricity. With monsoon receding, solar power generation will pick up, and this year is a better wind season than 2020," explained Mishra.

When will the situation improve?

India’s electricity demand has been growing and was 174 GW on 4 October. Peak power demand touched a high of 200.57 GW on 7 July. According to CRISIL, the coal inventory at thermal plants will improve only gradually by next March. “For this fiscal, it will hover around 10 days compared with the two-year average of around 18 days," a CRISIL report said. Also, coal logistics depend on railways. With the festive season coming up, followed by the harvest season, rail wagon availability becomes scarce.

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