Why does India face a recurring power shortage despite having sufficient coal stock?

India has the fourth largest coal reserves in the world. It is the second largest producer of fossil fuels behind China and home to the world’s largest coal miner, Coal India, which accounts for 80% of the country’s domestic production.

The exploitable capacity of the coal blocks already allocated is about 15 to 20% higher than the demand expected in 2030.

So why, year after year, India’s power plants face coal shortages that lead to widespread blackouts, leaving parts of the country in the dark and industries in limbo. There are several factors.

India has a long-standing policy of minimizing coal imports. In February 2020, Coal Minister Pralhad Joshi said the country would stop importing thermal coal from 2023-24.

Joshi had said the coal ministry would coordinate with the railways and shipping ministry and allow Coal India, captive and commercial miners to evacuate more coal by 2030.

But despite efforts to increase domestic coal supply, there was a gap between coal demand and supply. And the coal stocks of the power stations are depleting at a worrying rate. Today, the Department of Energy blames falling coal imports for the current crisis. In 2018-19, 21.4 million tonnes of coal were imported for blending, 23.8 million tonnes in 2019-20 and in 2021-22 it fell to 8.3 million tonnes.

Coal inventories at power plants have fallen about 13% since April to the lowest pre-summer levels in years. And for the first time since 2015, Coal India will import the fuel for use by public and private power generation companies.

The Department of Energy said the decision was made after nearly every state suggested multiple state bidding for coal imports would lead to confusion and sought centralized supply through Coal. India.

The Center has had to face a setback from the States, because imported coal is five times more expensive than that extracted at the national level.

Recently, the government has also stepped up pressure on utilities to increase imports to mix with local coal.

He even warned of cuts in the supply of coal mined in the country if power plants did not build up coal stocks through imports. But the Department of Energy asked states on Saturday to suspend “ongoing” tenders.

Despite record production, Coal India’s supply was unable to meet demand.

In April 2022, the company recorded a growth of 27.64% producing 53.47 million tons.

Former Coal Secretary Anil Swarup told the Washington Post that Coal India’s production had stagnated over the past few years due to the government’s inability to appoint senior executives and fund the expansion of the facility. mining.

Shreya Jai ​​from Trade standard dots amismatch between the Ministries of Coal, Electricity and Railways. central units did not stock up when Coal India had a surplus of coal. Imported coal-fired power stations have not been in operation for several years. The pressure of coal mining and supply rests solely with Coal India.

Coal India’s production has grown more slowly than captive mines, awarded over the past six years. During the 2020-2022 period, production from captive mines jumped 38.5% while CIL saw a timid growth of 3.4%, according to government data.

These captive mines have been awarded to private companies and utilities for the past five years after the Supreme Court in 2014 removed all coal block allocations made over the past two decades.

Last year, three coal auction rounds took place after a two-year hiatus and nine blocks were successfully awarded

In September 2021, the Union Coal Ministry issued a stern warning to owners of captive coal blocks, saying their mines would have to increase production or face regulation of CIL’s coal supply.

The ministry observed that production from these mines was below target.

Of the 43 operating coal mines assigned to private companies in the electricity, steel and metals sectors, not one is meeting its annual production target.

On May 6, Coal India announced that it would offer its 20 closed and abandoned underground coal mines to the private sector to reopen and bring into production on a revenue-sharing model.

Shreya Jai ​​said the current electrical supply chain seems unprepared to handle the period of strong growth, state discoms are unable to afford gencos, but eThe electricity supply chain needs to be fixed starting with state discoms, she said.

Meanwhile, the railroads are struggling to balance the thermal power industry’s demands for faster coal supply with the demands of other industries. He must keep the rakes ready to meet growing demand for just about every other bulk product, from cement and steel to sand and food grain.

Discom’s strained balance sheets have consistently triggered late payments to power producers, often affecting cash flow and discouraging new investment in the power generation sector.

For the second time in two years, the Union Department of Energy has notified a scheme allowing discoms to defer their dues to power generation companies. As discom dues hit a record 1 trillion rupees, the ministry has come up with a plan to liquidate discom dues in 48 monthly instalments.

Strengthening the power sector value chain will ensure the long-term resolution of the mismatch between coal supply and demand.


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