Explained: India's Coal Supplies Are Running Dangerously Low

Concerns on coal have also come from political quarters, as Power Minister RK Singh describes the situation as "touch and go"

India is running perilously low on coal for thermal power generation, shows data from the Central Electricity Authority. According to their daily release on coal stocks through the National Power Portal, 17 of India's 135 coal-fired thermal power plants have zero days worth of coal, which is as of October 3.

On average, there are only four days worth of coal stock, that is 7.809 million tons of coal. The data show that the daily requirement for coal across all categories of plants is 1.824 million tons.

107 power plants have critical or super critical supplies, which the data show is eight days or less worth of supplies.



India's Power Minister R K Singh has also described the situation as "touch and go". "I don't know whether I will be comfortable in the next five-six, four-five months… Normally the demand starts coming down in the second half of October… when it (the weather) starts cooling… But it's going to be touch and go", said Singh to the Indian Express.

Thermal power is the largest source of energy in India, with 2,34,023.72 MW of power, or 60.33% of India's installed capacity. Coal-driven thermal power generates nearly 2.08 lakh MW, or nearly 70% of output as of end-August. The two other fuels used for thermal power are diesel and gas. Find the data here.

The Indian coal shortage mirrors a global shortage, attributed to a growing demand of power globally as countries continue to reopen and gradually shed their COVID-19 restrictions, testing global supply chains around the world.

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Why has this occurred?

Indications were present that a coal-driven energy shortage was in the making.

Reuters, on September 15, reported that in a letter on February 4, Coal India - the public-sector undertaking that produces nearly 80% of India's coal and the world's largest coal miner - warned the government that a coal shortage was looming. The report said that Coal India asks utility suppliers to stock up on coal before the monsoons (usually from June to September), when transport becomes difficult and output is strained, and production generally slows down.

However, Coal India was worried that with the increasing output due to lifting of COVID-19 restrictions, companies were tapping into their existing stockpiles rather than buying fresh supplies to keep up pace. The deficiency in stock buildup from April onward is evident from publicly available data. According to research analysts, Indian coal stocks hit an all time high of 132 million tons at the end of the financial year (March 31, 2021), which can be read here.

"State-run Coal India told the Central Electricity Authority (CEA) that it was "evident that a crisis is arising" unless immediate action was taken to increase supply to power plants, according to a Feb. 4 letter reviewed by Reuters", the story says.

Later in the month on February 25, a letter by Coal India confirmed that power plants continued to use existing stockpiles despite requests by them to buy fresh stock.

More recent reasons behind the shortage is the widening price differential between domestic coal and imported coal with respect to India.

Domestic prices are determined by Coal India, and hikes in them are associated with cascading effects in inflation and power prices, making the decision politically sensitive. Reuters reports that Coal India has kept prices steady, even though coal prices in Asia have hit record highs.

This development has had an impact on how India imports coal to fill deficiencies in the fuel. Data compiled by Reuters shows that when global prices in coal rallied 40% to all time highs, weekly imports in August and September dropped 30% relative to the average of January to July, to nearly 3 million tons. India imports coal from Australia, Indonesia and South Africa.

Officials say that while broad outages are unlikely, some pockets in the country might be impacted.

The stocks of Coal India, and thermal power companies like another state-run National Thermal Power Corporation (NTPC) and Tata Power have been the real winners, rallying 35%, 25% and 37% respectively in a rolling 30-day period ending October 5, given the coal shortage and output demand.

The CEA data being referred to in the story can be found here.

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Note: An earlier version of this story carried data as of September 30, which showed 104 plants with critical supplies, 15 plants with zero days worth of supplies and different average numbers.

Updated On: 2021-10-06T12:03:30+05:30
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