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India on Brink of Energy Crisis Orders Power Generation Boost

Authorities are working hard to dispel fears of looming blackouts, insisting ‘there’s no power crisis’ and that there are ample stocks of coal, despite some power plants running low

Soaring price rises and heavy rains have slowed imports and the supply of coal from Indian mines to its power plants, while demand has surged as the economy recovers. Photo: Reuters.

 

The Indian government is scrambling to ramp up power generation amid growing concern that shortages of coal could plunge the country into blackouts.

Authorities have issued guidelines to boost coal supplies and have called on “captive” power plants – those that supply particular factories and other large-scale energy users – to sell more electricity to the national grid.

The Ministry of Power over the weekend ordered “some power plants not generating to their full capacity” to optimise their output to help meet the electricity grid’s needs. States such as Delhi, Odisha, Tamil Nadu, Maharashtra and Punjab have warned of rolling blackouts starting this week if coal supplies don’t improve immediately.

India, like China, is teetering on the brink of an energy crisis as coal stocks run low and power demand surges as the economy recovers from the Covid pandemic. Excess rainfall has flooded mines and hindered the movement of coal supplies. And record global prices have forced plants to stop importing the fuel and run at less than half of their capacity.

While analysts warn that stocks could be depleted and outages become rife within days, the government has sought to head off public panic saying that there is no crisis.

Coal Stocks Low

According to official data, more than half of India’s 135 coal-based power plants, which satisfy 70% of the country’s energy needs, had just four days of coal stocks at the end of September, down from 13 days at the beginning of August. Regulations mandate that 22 days of stock be kept at thermal plants.

Payment delays by power generating companies also forced the state-owned Coal India Ltd (CIL) to restrict supply, preventing some power plants from running at full capacity, according to Vibhuti Garg, energy economist at the US-based Institute for Energy Economics and Financial Analysis.

At such times “India resorts to higher coal imports to bridge the gap, but given the skyrocketing coal prices, power producers have been reluctant to ramp up imports,” Garg added. “So, this year, while the gap was not met through coal imports, India also witnessed unexpected electricity demand growth, thus leading to a crisis-like situation.”

Benchmark thermal coal prices from major exporters have scaled all-time highs recently – more than doubling to $200 a tonne since the start of the year, with Australia’s Newcastle prices rising roughly 50% and Indonesian export prices up 30% in the past three months.

For India, imported coal prices have jumped from $60 a tonne in March 2021 to $160 a tonne in September and October. That pushed imports last week to less than 1.5 million tonnes, the smallest in at least two years, according to Reuters.

 

Hurried Reforms

Last week, the Ministry of Power instructed producers to use biomass pellets in coal-burning thermal power plants and encouraged the use of agricultural waste that is otherwise burnt by farmers and causes pollution.

Producers bound by power purchase agreements with state grids were also allowed to sell energy not lifted from the grid in 24 hours. The coal ministry on Friday also said an auction of 40 new coal blocks would be launched for private mining.

Earlier last week, India ordered power plants to maintain coal inventories for at least 15 days and up to 30 days based on their generating capacity.

 

‘Nothing to Fear’

Union Coal Minister Pralhad Joshi insisted there is no crisis and that coal supply will normalise over the next three to four days.

The country has 40 million tonnes of coal stock at mines and another 7.5 million tonnes at power plants, the ministry said in a statement, adding that these supplies were being ferried from mines to power plants, increasing generators’ stocks.

In a separate statement, the ministry said coal supplies to utilities rose to 1.92 million tonnes on Saturday, while consumption was 1.87 million tonnes.

 

• By Indrajit Basu

 

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Indrajit Basu

Indrajit Basu is an India-based correspondent for Asia Financial and wears two hats: journalist and researcher (equity). Before joining AF he reported on business, finance, technology, wealth management, and current affairs for China Daily, SCMP, UPI, India Today Group, Indian Express Group, and many more. He is also an award-winning researcher. If he didn't have to pay bills, he would be a wanderer.

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