Indian coal inventories are hitting a critical low level and the essential services are clamouring for coal supplies all over the country. The coal shortage in the country is caused by several factors that are summarised below.
Stock levels of coal: According to the data from Central Electricity Authority (CEA), 16 out of the 135 coal-powered energy plants in India had no coal stocks left as of 29th September. Over 80% of the power plants had coal that would last less than a week, and half of them had stocks left for less than three days.
India’s relies on coal for more than a 70 percent of its total electricity output. The essential services in India consume 75 percent of its coal.
Cause of shortage: After the second wave of the Covid-19 pandemic, the demand for industrial power in India rose significantly. Coal imports were stopped as the gap between domestic price for coal and global coal prices widened.
Coal India, which is run by the state is responsible for producing more than 80 percent of coal in India. Coal India stated that the power production using imported coal was curbed due to its record level global prices. Mining for coal domestically accelerated as the power production using imported coal was stopped.
Cause of rise in global coal prices: Price hike for domestic coal would put pressure on essential services in India. This could cause inflation and higher power prices. While India kept the price for coal steady throughout the year, coal prices had hit record high globally. As the economies opened up world-wide, demand for power generation increased again.
China faced a major power crisis which had an effect on the global demand for coal.
Power prices are set by the respective states in India, which is one of the countries with lowest power prices. Electricity generation sector has faced irregular cash flows and drop in investments.
India is the second largest consumer, producer and importer of coal and has coal reserves that are fourth largest in the world. Australia and Indonesia would stop exporting coal to India due to high demand from China and other countries.
As the global coal prices skyrocket, many of the power plants in India have curtailed production. The country might face severe shortage in power which could lead to power outages in some of the pockets of the country, officials said.
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