New Delhi: India may be staring at an acute power crisis this festive season. Half of the country’s thermal power reducing generation, as coal inventories hit critically low levels while surge in power demand post the Covid-induced lockdowns is not being supported by record global prices of fuel that has shot up more than three times in just over a couple of months.
Over half of the country’s 135 coal-fired plants are sitting on coal stocks of less than three days, while in others as well, fuel inventories are well below the stipulated 22-day stock, data from the Central Electricity Authority showed.
The situation is critical for state-run power generation units where poor financial condition of utilities has prevented them from proper stocking of coal.
“Global developments are now having a play in the Indian markets too. A sharp uptick in economic activity with the easing of the Covid pandemic has pushed up power demand. Maharashtra, Gujarat and Tamil Nadu are seeing demand rising by 14 to 20 per cent in the last three months.”
“Additional coal can only meet this demand. The production from Coal India is low now, as monsoons have just ended when the production is typically low. Imports are not an option, as global prices have touched historic high levels,” he added.
The development in the Indian market is a reflection of what is happening globally. Like in India, scaled-up industrial activities in economies from Europe to Asia have resulted in demand outpacing supply.
For India, the competition in the global coal market is coming from China, the world’s largest coal consumer. China is going on a coal hunt worldwide to address the energy crisis at home.
This has pushed up coal prices from all major suppliers.
The high global coal prices have prevented domestic companies from buying coal abroad to meet the local rise in demand.
Several of the country’s imported coal-based power projects have also reduced generation. Non-coking coal imports by the power segment were at the same level as in fiscal 2021. This came down compared to fiscal 2020.
The situation of fuel is particularly grim for non-power sector users, leaving players with stocks for 4-5 days only. Dispatches from CIL and SCCL were down compared to dispatches in April-August of fiscal 2020.
As the demand rose, spot e-auction premiums for August 2021 increased to 74 per cent compared to 30 per cent in the first quarter of this fiscal and 25 per cent in fiscal 2021.
“In the near term, the supply crunch is expected to persist with the non-power sector facing the heat as imports remain the only option to meet the demand, but at rising costs,” Crisil said.
“Coal inventory at thermal plants will improve only gradually by March next year. For this fiscal, it will hover around 10 days compared to the two-year average of around 18 days,” it added.
This would mean that the crisis would continue through the festive season with Coal India scrambling to meet the rising demand for fuel in the absence of support from imports.
