The coal crisis shook India over reports of rapid depletion of coal stocks from 28 days in March to four days in September. This was enough to get the government's attention to the power sector. Now that we are at it, the coal crisis is finally stabilising for India, while it continues to be a challenge for China. Let’s see what changed for the coal sector in such a short span of time.
How Did the Coal Crisis Ease?
The coal sector is back in power, which means the crisis that we all dreaded for all these days are finally stabilising. How? Let’s just say that the government wouldn’t let the country suffer without electricity. One thing to note is that Coal India accounts for 80% of domestic coal production and is the largest supplier to the power sector. With monsoon behind us and a good productive season ahead of us, CIL has now increased its coal offtake to over 1.5 mt/day. This is expected to rise 1.6-1.7 mt/day in the coming weeks. Additionally, states have lifted power curtailment orders. Bilaspur-based Coal India (CIL) has withdrawn its directive to suspend supply to non-power utilities, stated a media report. Even Punjab has lifted electricity curbs imposed on the industrial units.
Meanwhile, CIL is regulating supply to the non-power units until the average prices have improved. Also CIL has suspended spot coal auctions to the non-power sector so that the inventory of coal is stabilised at the power stations.
CIL Appears To Be The Savior
The coal production at CIL was hit after thousands of workers were infected, while around 200 employees lost their lives due to COVID-19. This resulted in low coal supply, which attracted criticisms. Despite all of this, CIL deserves a badge of good performance because it continues to offer a deep discount of 60-70% of imported coal. CIL has been able to significantly replace the import of expensive thermal coal with affordable tariffs for the domestic power plants. This becomes a huge benefit as power plants are able to save foreign exchange costs.
Will The Coal Sector Flourish?
India is not called ‘a coal-rich country’ for nothing. Although, there are far deeper problems dug in this sector. Yes, we have a lot of coal, but the process of extracting it is a bigger issue. The coal reserves in the country are situated in far remote areas where transportation is a huge problem. Another hiccup is to acquire environmental and forest clearances. This forbids private and foreign players to enter this space.
Also, the low pricing by CIL can’t be competed with, which naturally makes it the industry leader. However, the government is steadily showing willingness to work with the private players, which gives hope of a healthy competition to CIL. Healthy mix of coal companies in India will increase competition and better performance.
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