Explained | Effect of coal shortage on India's power supply

As India faces one of its worst heatwaves ever, coupled with power cuts, a blame-game is on over the virtually annual coal shortage

The heatwave in some regions of India coupled with a raging power crisis marked by multi-hour blackouts is causing hardship for many. At the centre of all this is coal -- or rather, the shortage of it. But how does coal shortage affect India's power generation, and why is it an annual affair?

What is the extent of India's coal shortage?

Over 150 power plants across the country have reported coal shortages this year. The coal stock position at the Central Electricity Authority (CEA) supervised 173 power plants stood at 21.93 million tonnes (MT), which, according to a Nomura report, is less than the regulatory requirement of 66.32 MT as of April 21.

Reports have suggested that coal inventories had dipped to the lowest since 2014 at the beginning of the financial year to nine days as against the Centre's mandated 24 days' worth of stock.

Why is India facing a coal shortage?

To put it simply, it's because of demand. While on one hand, the CEA said that coal stock at 81 out of the 150 government-owned power plants is critical, on the other, is the increased power demand -- from 106.6 billion units (BU) in 2019, it increased to 124.2 BU in 2021 to 132 BU in 2022.

Back in October 2021, the coal supply crisis hit a tipping point when several power plants reported that they had less than four days' worth of stock on hand. During that time, an IMD report said that the crisis could be exacerbated by heavy rains in Odisha, Jharkhand and West Bengal -- all major coal-producing provinces.

During that period, the government defended its position saying that there is no crisis, and the situation would "improve soon". Meanwhile, the Centre's core management team assessed the reason for supply shortage, and found that the rains in coal-producing states, coupled with inadequate stock build-up at power plants, resulted in the crisis.

How will the shortage affect electricity supply and cost?

According to Fitch Ratings, the demand-supply mismatch of coal is evident in the increase in the daily electricity deficit to around one per cent from the average of around 0.3 per cent. Additionally, there has been an increase in trading prices of electricity on exchanges, with prices reaching Rs 8.23/kWh in March from Rs 3/kWh earlier. High short-term rates have also led the central regulator to cap the price at Rs 12/kWh, lower than the earlier cap of Rs 20/kWh applied by the exchanges.

The rise in demand has been met with load shedding and planned outages by states like Andhra Pradesh, Gujarat, Maharashtra, Jharkhand, Bihar, Haryana and Uttarakhand, according to a report by The Hindu. Since April 1, Jharkhand has been facing an average supply shortage of 10-12 per cent, followed by Andhra Pradesh (10 per cent), Uttarakhand (8-10 per cent), Madhya Pradesh (6 per cent) and Haryana (4 per cent), the report said.

Why is the coal shortage an annual affair?

There is a lack of planning and coordination between entities involved in the process of producing and supplying coal -- the Power Ministry, the Coal Ministry and Railways.

While the Coal Ministry blames the Railways for unavailability of rakes, the Railways has accused Coal India Limited of mismanagement in loading and unloading of rakes.

Despite high coal production and despatch by CIL and other PSU miners, the supply at power plants has still not gone above 15 days in the last six months, a report by The Hindu Business Line stated.

How is the government tackling the shortage?

A mix of dismissal of the crisis and actions are the government's means to tackle the supply issue. While on one hand, the Centre said coal production from captive mines increased to more than double in the country compared to the last seven years, Coal Minister Pralhad Joshi dismissed apprehensions of any coal shortage.

Meanwhile, Power Minister R K Singh has told states to step up coal imports for the next three years, in a move seen as being contrarian to the national objective to buy less coal from overseas. States were asked to sign long-term deals to ensure supply and secure lower prices, and purchase rail wagons to address logistics challenges. The government has also cancelled some passenger trains to make way for coal carriages.

-- With agency inputs.

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