Case Study | China isn’t alone in coal shortage now

Coal in hand

Now, China is not alone in struggling with an energy insufficiency; India is also steering to the brim of a power crisis.

Almost all of India’s coal-driven power plants have seriously low-levels of coal inventory amid a time when the economy is climbing back up. 70% of India’s electricity generation comes from coal.

The government published stats regarding 80% of India’s coal-fired plants had less than eight days of supplies left as of 6th October. More than half of these stocks were only worth less than two days.

What happened?

Falling coal imports and a combination of supply factors have wobbled to the current crisis scenario.

India witnessed a hike in power demand between April and August. That happened as a result of regaining momentum after the tedious second wave of the pandemic.

According to what Hetal Gandhi, director of research at rating firm CRISIL (a subsidiary of S&P Global), said that the economy was keener than what a lot were anticipating. 

Gandhi said that thermal power companies had insufficient coal inventories and did not expect a hike in power demand this year. Other sources of electricity creation, like gas, nuclear, and hydropower were also dropping.

Uneven monsoon season distribution was a factor, said Gandhi. Less rainfall in many areas of the country would adversely affect the production of hydropower.

She also added that other sources like gas have seen a spike in prices and also maintenance shutdowns in nuclear power plants. All of these things directed to a rise in coal-driven power creation.

Why is coal becoming a shortage?

India is the world’s third-biggest coal importer, even though the coal reserve is humongous. However, there is a broadening gap between rising international coal prices, and because of this local, or domestic coal prices witnessed a decrease in imports recently.

As supply declined, demand rocketed.

Coal imports by power plants dropped 45% in July and August, in comparison to the same period last year, while India’s non-power industries relied more on domestic coal. Non-power sectors like aluminum, cement, paper, and steel typically need titanic quantities of coal to generate heat.

Coal prices in India are majorly decided by the state. Hence, when international prices increase, domestic prices do not increase in proportion to it as it would directly impact power prices and inflation.

Substantially, whenever imported prices heighten, the incentive for domestic manufacturers to import coal and generate power is on the declining side.

What could happen?

The energy supply could barely last as long as six months, alarmed India’s Power Minister Raj Kumar Singh.

However, Coal India has reported ramping up supplies to attempt to balance some of the insufficiency of coal.

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