Power crisis to worsen with the early heatwave

The central government and states have blamed each other for fuel shortages at power plants and the ensuing blackouts. On Thursday, Union power minister Raj Kumar Singh said the inability of state distribution companies (discoms) to purchase electricity and coal and inadequate planning by state governments caused the crisis. In turn, states such as Maharashtra, Delhi and Rajasthan have blamed the Centre for the crisis, saying coal supplies have been erratic. Several states, including Maharashtra, Andhra Pradesh, Punjab and Gujarat, have resorted to massive power cuts as demand outstripped supply amid soaring demand for air-conditioning.

The Union power ministry said peak power demand surged 12.1% to 204.65 gigawatts (GW) in April from 182.559GW in the year earlier. India’s power demand on Thursday touched 204.6 GW and is expected to rise further as temperatures soar. The peak power demand reached 6GW in the national capital on Thursday.

Experts said the power sector is staring at a major crisis.

“It’s a perfect storm with demand peaking due to extreme heatwave and reviving economic activity, inadequate domestic coal production, high international coal prices and financially wrecked discoms. One can expect widespread demand curtailment in many parts of the country till the heat conditions moderate," said Debasish Mishra, partner at Deloitte.

“Additional worry is power plants are running on hand to mouth existence ...This could lead to a bigger crisis in September/October when the demand comes back," Mishra added.

However, the power minister said he expects peak power demand to stabilize at this level. “Whatever increase in demand had to happen, I think, has happened. It will be around 205GW. My estimate is it may go up to a maximum of 207-208GW," Singh said. “The clear thing is that the demand in energy terms has increased by 20% compared to pre-covid level."

The India Meteorological Department (IMD) forecasted that the extreme heatwave conditions over large parts of the subcontinent would continue for the next five days.

Singh said the 21 million tonnes (mt) of reserve coal stocks are enough to run coal-fuelled power projects for the next 10 days, even if coal supply stops from mines. India’s power plants burn around 1.85-1.87 mt of coal daily to generate electricity.

Noting that the country has an adequate reserve of coal stocks, Singh told reporters, “Now, there will be some sort of shortages somewhere because some states have not made payments. Further, in some instances, even if coal is allotted, states cannot lift it. This is wrong planning."

The depleted fuel stocks at power plants have led to concerns about a possible power crisis as coal-fuelled power projects totalling 204GW remain the mainstay of India’s electricity generation, accounting for more than half of the country’s capacity.

According to data shared by the Union power ministry, the dues of state power generation companies to Coal India Ltd currently stand at ₹7,918.72 crore. Maharashtra State Power Generation Co., West Bengal Power Development Corp. Ltd and Jharkhand’s Tenughat Vidyut Nigam Ltd owe Coal India ₹2,608.07 crore, ₹1,066.40 crore and r1,018.22 crore, respectively. Recently, Coal India, the country’s largest miner of the fuel, said that it had raised its supplies to thermal power stations by 14.2% during the first half of April from a year earlier.

The current crisis has been exacerbated by the lack of coal imports for imported coal-based power projects, with coal prices trading at near record-high levels. India’s coal requirement is expected to go up to 1,123 mt by 2023 from 700 mt. India has the world’s fourth-largest reserves and is the second-largest producer.

Singh said imports of the fuel fell from 69 mt in FY20 to 27.72 mt in FY22 and added the government’s directive to power plants last October to import 36 mt of coal in FY23 was “conservative", given the surge in power demand.

On Thursday, Delhi power minister Satyendar Jain wrote to the Centre about the coal shortage after an emergency meeting. According to a statement from the Delhi government, there is a coal crisis in Dadri-II and Unchahar Power Stations, as stocks are left only for a day or two.

Last year, India faced a similar situation because of a sharp depletion of fuel stocks at 14 imported coal-fuelled power projects due to the spike in global coal prices. “If you suddenly drop coal imports, where do you expect the coal to come from," Singh said, adding that several states are not importing coal because of high prices.

Noting that global coal prices neared $140 per tonne, Singh said a blending of only 10% of imported coal would lead to an increase in prices by 5-10 paise per unit, which would be a better proposition than buying power at ₹12 per unit from domestic exchanges. He added that several states resort to power cuts instead of buying power at ₹12 per unit.

“Tariff for merchant power sold on exchanges may average more than ₹6 per unit this quarter—the highest for any quarter in the past five fiscals," Crisil Ratings said in a 25 April statement.