Coal Shortage in India Leads to Energy Crisis

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Indian industry is in the midst of a mini-crisis — more specifically, a power crisis.

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In fact, both industrial and retail consumers in many parts of the country are reeling from electricity cuts, due to a shortage in supply of coal to thermal plants.

Incidentally, Piyush Goyal, India’s coal minister, was also appointed railway minister recently. The railways transport a bulk of the coal to power plants around the country.

Yet, not much is coming out of the minister’s office regarding the coal shortage. In fact, in his role as coal minister, Goyal earlier declared India’s “independence” from imported coal.

Some time in June this year, the coal secretary announced India did not need to import coal from anywhere in the world, as it had sufficient capacity.

Now, all that seems so far away.

Why Goyal finds himself in an unenviable position today is because some have claimed the Indian Railways had exacerbated the crisis by failing to transport adequate coal from mines to power plants.

The power shortage had become so critical that many of India’s aluminum smelters dashed off a letter to Prime Minister Narendra Modi seeking his intervention to defuse the fuel crisis.

Between April and October this year, Coal India Ltd (CIL), the state-run monopoly, had managed to produce 278 million tons (MT) of coal, while it sold 317 MT by liquidating some existing stocks. Reports said its total stocks at the beginning of the year was about 68 MT, which now stood at 29 MT.

Other subsidiaries, like Central Coalfields, Mahanadi Coalfields and Central Coalfields, saw their production during the period fall by 9.1%, 17.7% and 2.3%, respectively.

In October, for example, total loading of imported coal by the national transporter increased by 54.74% to 8.65 million tons from 5.59 MT in the same month last year, according to mjunction, an online procurement and sales entity jointly promoted by the Steel Authority of India Ltd (SAIL) and Tata Steel.

What is especially bothering industry is that the price of coal is significantly increasing in the international markets, making imports an expensive prospect. Furthermore, even domestic household consumers have had to bear the blunt of coal shortage for a time when power supply to their homes got disrupted.

Here’s one example of the disruption being created by coal shortage.

In the first six months of the fiscal year, Vedanta Aluminium received only 0.63 MT of coal, against a contracted quantity of 1.48 MT, a shortfall of 57%.

Clearly, Goyal’s plan to get CIL to produce 1 billion tons of coal by 2019-20 has evaporated.

Now, according to media reports, CIL plans to almost double supplies to power generators within a 60-kilometer radius of its pits, using 13,500 trucks every day, in a bid to ease the shortage.

The move is part of Coal India’s ease of business initiative that allows power consumers near pit heads to take coal directly from the mines. CIL has listed 20 mines from which eligible consumers can take the coal.

CIL is also talking to the railways to increase rake loading from an average of 216 so far since April to 250 by the end of the fiscal year, to meet the increased demand.

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The crisis will reach a critical stage if efforts to defuse it do not bear fruit. At present, coal stocks at power plants were good for a few days only, while 22 plants had critical stocks. Total stocks at power plants was about 8 MT, compared with 18 MT a year earlier.

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