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Updated on: Tuesday, October 05, 2021, 02:45 PM IST

'Touch and go': With just four days of coal reserves left, India's energy sector braces for the worst

Coal inventories at Indian power plants fell to around 8.1 million tons at the end of September, about 76% less than a year earlier
The squeeze on India's coal supply is triggering a power crisis that's threatening to stall the economy
 | Representational image/Pexels

The squeeze on India's coal supply is triggering a power crisis that's threatening to stall the economy | Representational image/Pexels

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India's coal-fired power stations had an average of four days' worth of stock at the end of September, the lowest in years, and down from 13 days at the start of August, as per a report by NDTV. Coal inventories at Indian power plants fell to around 8.1 million tons at the end of September, about 76% less than a year earlier, according to government data. Average spot power prices at the Indian Energy Exchange Ltd. jumped more than 63% in September to 4.4 rupees ($0.06) a kilowatt hour.

The squeeze on India's coal supply is triggering a power crisis that's threatening to stall the economy. More than half the plants are on alert for outages. With coal used to produce almost 70% of electricity, spot power rates have surged, while supplies are being diverted away from key customers including aluminum smelters and steel mills.

Like China, India is contending with two key challenges -- soaring electricity demand as industrial activity rebounds after lifting of pandemic curbs and a slump in local coal output. The country meets around three-quarters of its demand locally, but heavy rains have flooded mines and key transport routes.

Operators of coal-fired plants now have a tough choice to make --either pay large premiums at domestic auctions to secure any available supply or wade into a seaborne coal market where prices have reached record highs. The Centre is already is drawing up guidelines in case it needs to bring idle power stations back into action.

Like China, India is contending with two key challenges -- soaring electricity demand as industrial activity rebounds after lifting of pandemic curbs and a slump in local coal output. The country meets around three-quarters of its demand locally, but heavy rains have flooded mines and key transport routes

"Until supplies stabilize, we are likely to see power outages in some pockets, while some customers may be asked to pay more for power," said Pranav Master, director for infrastructure advisory at credit ratings firm Crisil Ltd. He explained that as prices of coal imports have hit record highs the domestic producers have been bearing the brunt of the demand but he struck an optimistic note by saying that things are expected to get better as the rains abate. He said that the consumers will feel the pinch in some months as when the distribution utilities get regulatory approvals to pass on the cost.

The rising electricity bills are likely to put a dent in India's stellar growth rate. The economy is forecast to expand 9.4% in the year through March 2022, which would be the fastest pace among major global economies, according to a Bloomberg News survey.

The energy crunch is a reminder of the vital role coal plays in India's economy, even as Prime Minister Narendra Modi targets a huge increase in renewables and the nation's top billionaires rush to add green investments.

"I don't know whether I will be comfortable in the next five to six, four to five months," Power Minister Raj Kumar Singh was quoted as telling The Indian Express in an interview published Tuesday. While demand does typically slow with cooler weather from mid-October, "it's going to be touch and go," he said.

Supplies to power plants are currently short by between 60,000 and 80,000 tons a day on the impact of the prolonged rains that have drenched coal pits, said Anil Kumar Jain, India's coal secretary. Unusually heavy downpours last month in Dhanbad, a major coal mining center in the east of the country, have worsened the situation, he said.

Coal India should be able to increase supplies enough by the second week of October to cover the deficit at power plants, although that will depend on the weather, Jain said. However, it will take much longer to replenish the badly depleted stockpiles.

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Published on: Tuesday, October 05, 2021, 02:45 PM IST
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