What is the extent of the current coal crisis?

A number of states including Delhi, Punjab and Rajasthan have raised concerns about potential blackouts as a result of low coal inventory at thermal power plants. Rajasthan, Punjab and Bihar have already reported load shedding as a result of thermal power plants operating at low capacity.

The shortage in coal is a result of a sharp uptick in power demand as the economy recovered from the effects of the pandemic. Total power demand in August was 124 billion units up from 106 billion units in August 2019. A sharp increase in the international prices of coal due to a shortage in China and low accumulation of stock by thermal power plants in the April-June period have also contributed to the coal shortage. Heavy rains in coal bearing areas in September had also led to a slowdown in the supply of coal to thermal plants.

Coal and lignite fired thermal power plants account for about 54 per cent of India’s installed power generation capacity but currently account for about 70 per cent of power generated in the country.

What is the government doing to address the situation?

Officials at the power, coal and railways ministries are monitoring the coal supplies to thermal plants and have taken steps to increase the daily shipments of coal to power generators. Coal minister Pralhad Joshi tweeted on Wednesday that coal shipments to thermal power plants had crossed 2 million tonnes against a daily requirement of about 1.87 million tonnes of coal as on October 11.

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The power ministry has also permitted power generators using local coal to use upto a 10 per cent blend of imported coal to boost coal stocks. Despite international coal prices being near record highs, the government estimates that a 10 per cent blend of imported coal would likely lead to a 20-22 paise increase in the per unit (kilowatt-hour) cost of power generation. Officials noted that generators could seek to increase the price they charge to discoms under Power Purchase Agreements with power distribution companies as these companies are currently meeting shortfalls in power supply by purchasing power at significantly higher rates on power exchanges.

Purchase bids on the Day Ahead Market (DAM) on the India Energy Exchange (IEX) on October 12 were for 430,778 MWh (Megawatt-hours) up from 174,373 MWh a month ago. Purchase bids far outstripped supply leading to the average market clearing price Rs 15.85 per unit up from Rs 2.35 per unit a month ago.