India’s coal crisis- Will it derail the nascent financial recovery of India?

 India these days is severely running out of coal dangerously and this makes it face the prospect of power cuts at a large scale. Since almost 70% of the energy or the electricity production in India was dependent on coal, the low level of coal has resulted severely in large scale power cuts. 

As per the reports from the Central Electricity Authority of India, almost 67% of the thermal plants out of total 135 thermal plants are left with just a few more days of coal supply. And the worst is that 16 out of these 135 thermal plants have already been closed as they are completely running out of coal supplies.

Since the COVID pandemic is under control and the economic activity in the country is resuming to its prior position, this resulted in the rise in the demand for electricity. In August 2021, the government of India states that the demand for power in India is 17% higher in comparison to pre COVID level of August 2019. 

The prices for coal are hiking all around the world and this is the reason why the country is avoiding the purchase or import the coal from other counties. Since the prices of coal in the international market are all times at their height, India is more relying on domestic stocks. 

Though the country is producing more than 80% of the required coal but is facing serious issues in dispatching and transporting the coal to the power plants and the industries where it is required. The production of coal in India is almost around 42.6 million tonnes which are almost enough to meet the 80% requirement of fuel in India. But due to excessive rains in September, the coal could not get mined to the power plants, and this leading to to the aggravation of the coal crisis issues in Indian power plants.       

Not only India is facing the issues of the coal crisis, but other countries like China are also facing the coal low levels. The coal shortage in china is up to such an extent that several regions in that country are facing the issues of unannounced power cuts. Also, as per the estimate by Goldman Sachs, more than 44% of the Industrial activity in China is started being impacted by the shortage in coal and thus the power shortage. 

Now the question arises, why India or the world is facing the crisis of coal?

Reason for the coal crisis in India

The issues of several shortages of coal have been prevailing in India. Just a few days of coal stock for the electricity production has been left in most of the thermal power plants and this condition can be uncomfortable for the coming few months. The report says that almost 70% of the power plants in India his left with few days of fuel stock. Also, the Power minister on 1st October announced that 135 thermal plants in India are left with coal stock for only 4 days. But the question is what is the reason for such a big shortage of coal in India? The reasons for such a big coal crisis in India are: 

Increase in power consumption:

After the COVID pandemic, the industrial activity of India is resuming to its prior point. And, this has resulted in an increase in the demand and the consumption of power. In August 2019, the power consumption was around 106 billion units in India. But in August 2021, the power consumption increased to 124 billion units in India. The increased consumption of power has resulted in an increased demand for electricity. Since most of the power plants in India are coal based, and thus the demand for the coal is also increasing. Only the demand for the coal is increasing with time but not the supply, and this has resulted in a big gap leading to the coal crisis in India. 

Unseasonal rains

Generally, September is not the time for the Rain. But the coal mining areas like Chhattisgarh, Jharkhand, and others are facing Heavy September rains. This hits the coal production a much and has impacted the delivery of the coals to the power plants as well. This made the power plants fail to pre stock their coal stock before the Mansoon hits.

More demand less supply 

  As mentioned, the demand for the coal has outstripped the supply and this has increased the coal crisis in India. 

Less import

As the price of the coal in the international market is at its highest price all the time, and this is the reason why the country is avoiding importing coal from the outer countries. The country is avoiding paying the high price of the coal in the international market instead of relying more on the domestic coal stocks which are also declining. 

What are the impacts of the coal crisis in India? 

The crisis of fuel in the nation is no doubt the major reason for the pause of the economic growth as well as the industrial growth of the country. The coal crisis in India has also been impacting in the same way. Following are some impacts of the Coal crisis in India:

  • Major electricity shortage in India and has resulted in the delay in the reopening of the Indias economy as well. 
  • Downscale production in multiple businesses due to unannounced power cuts. 
  • As India is underdeveloped in infrastructure and this resulted in the coal crisis hit harder and longer.  

What are some measures India Government is planning to take in order to meet suppress the coal crisis in India?

The NTPC Ltd and the state-run coal India has been working to raise the domestic coal output from the local mines. 

The government of India has been making more efforts to bring several more coal mines in a stream in order to boost the supply of coal.

Despite the high financial cost, India is planning to import coal from the international market.