Blackout To Occur In India Due To Coal Shortage

Recently, a situation of coal shortage for thermal power plants has risen in the country leading to the fears of power cuts.  Andhra Pradesh Government has asked its people to avoid using ACs after 6 pm.

Bihar and Jharkhand are already facing power cuts of 5-6 hours.

Is only India facing such issue?

In past few days, China has also faced major power shortage in its cities. Also a German power plant just ran out of coal giving a shock to German economy.  A blackout occurred in Lebanon due to fuel shortage. Also unseasonable summer in European countries increased the gas consumption in European countries this year. It also played a key role in hiking the natural gas prices. Countries like UK switched on its old power plants. So, due to high demand of coal, he coal prices also increased. Due to which, coal has achieved a record 13 year high price.

Fossil fuels still cover 84% of needs of the world. Fossil fuels consist of oil, natural gas and coal. Crude oil has now crossed 80$/barrel.

What is the ground situation in India?

Power minister R K Singh has described the crisis beyond usual and the situation as touch and go. High demand and low supply has generated a shortage and now power plants are left with just 4 days of coal stock as reserve. So, in next few weeks or months, we are on the verge of facing a power shortage. Fortunately due to upcoming winter season, power cuts will not be as troubling as it could be in summers.

In year, 2019-20, India has consumed 73% domestic and 27% imported coal. According to data, in the first 8 months of 2021, the power demand has increased 13.2%. Due to hike in coal prices, India imported 30% less coal in August and September in comparison of past 7 months.  Even if we compare August 2021 with August 2020, India has imported 42% less coal.

As per the website of IEA (International Energy Agency), China consumes 56% of coal of the world whereas India consumes only 11%. ASEAN countries use 5% and USA uses 6% of coal because USA is majorly dependent on oil. So India and China will be very much affected by the coal crisis.

Due to COVID-19, the coal consumption and also its production had drastically declined, now due to sudden rise in the market; production is not able to meet such demand. Now global demand for coal has crossed pre- COVID levels, underlining the world’s emissions challenge. Coal is used 68% in electricity generation, 7% in steel production, 4% in cement production, 3% in heating and 18% for other uses. As per the article of mint, India’s steel output is expected to jump 18% to 120MT in FY22.

The union ministry of power has listed following reasons for the depletion of coal stocks, and set in motion various steps to deal with the situation.

An unprecedented increase demand for electricity- the daily consumption of electricity has crossed beyond 4 billion units per day.

Heavy rains in coal mine areas during September 2021- flooding and water logging in mines delayed the normalization of coal supplies, especially in the open-cast mines. Also the transport was affected.

An increase in prices of imported coal to an unprecedented high level- the imported coal price of Indonesian coal jumped from $60/ton in March 2021 to $160/ton in September/October 2021 of 5000 GAR (Gross as received) coal. This led to reduction in imports which in turn increased pressure on domestic coal further.

Non- building of adequate coal stocks before the onset of monsoon- some states have not collected sufficient coal stocks in their reserves before onset of monsoon.

As per the data of CEA, as of 4^th October, of the 135 coal-powered power plants, in 108 power plants, the coal stock was critical or super-critical.

Legacy issues of heavy dues also one of the factors- legacy issues of heavy dues of coal companies from certain states have also added the crisis. These states are Maharashtra, Rajasthan, Tamil Nadu, UP, Rajasthan and Madhya Pradesh.

What is India doing to tackle this crisis?

Australia is one of the major exporters of coal. Due to various matters between Australia and China, like- Australia building up its navy, tussle in Indian ocean region, Australia taking part in QUAD exercise, Australia’s proximity to US, Australia demanding the probe of origin of COVID-19, China is not buying from Australia. So, tons of coal of Australia is lying on Chinese ports due to geopolitical issues. Chinese vendors cannot buy it. So India is using this opportunity in its favor. India is getting the coal at a $12 to $15 a ton discount. It cannot resolve the crisis completely but it will definitely give a sigh of relief to India.  

Due to improper billing, states do not get back the full payment of the electricity by people. We need to understand that fossil fuels are limited, so they should be used wise