Why there is a coal crisis in India

While both power producers and distributors have warned of power cuts, the Union government maintains that coal stock is being replenished and power generation will not stop.
Coal mine
Coal mine
Written by:

Over the past few days, several states have sent warnings and have flagged urgencies in their power situation to the Union government — from Kerala’s Electricity Minister saying the state may have to resort to load shedding and Karnataka CM Basavaraj Bommai asking for additional allocation, to Andhra Chief Minister Jagan Mohan Reddy asking for remedial measures.

All of this has been due to the non-availability of coal stocks to states, even as the Union government continues to maintain that there is ample coal in the country to meet demand. It has dismissed any fear of disruption in power supply as "entirely misplaced".

Electricity consumption has jumped almost 17% in the last two months alone, when compared to the same period in 2019. And roughly 70% of the country’s energy requirements are still met by coal. Union Minister for Coal and Mines Pralhad Joshi said on Wednesday, October 13 that the government is further increasing coal dispatch to power plants to ensure sufficient coal stocks. According to the government, while there is ample stock there has been some depletion mainly due to:

> Increase in electricity demand due to the revival of the economy (and due to festivals)
> Heavy rains in areas where there are coal mines
> Increase in price of imported coal
> Lack of adequate stockpiling before the monsoon

Now, both power producers and distributors have warned of power cuts and blackouts. The Union government maintains that stock is being replenished and power generation will not be stopped, despite low stocks.


As per data released by the Central Electricity Authority (CEA) on Sunday, October 10, 70 out of 135 of India’s thermal power plants had stocks categorised as “supercritical”, with less than four days of coal. 

Seventeen plants had zero days of dry fuel with a cumulative capacity of 16,430 MW.

According to the data, 26 power plants with 34,930 MW capacity had fuel for one day, 22 plants with 27,325 had coal for two days, 18 had three days of coal stock with 24,094 MW capacity, 13 plants with 15,210 MW capacity had coal for four days, 11 plants had five days stock with 10,775 MW capacity and 8 plants had six days of coal stock with 11,450 MW capacity.

Guidelines of the CEA require at least 14 days of stock, but according to the Economic Times, this limit may be eased soon, and be based on plant load factor. In September, it was reported that the Power Ministry may be looking at reducing the number of coal stock days to 10. 

It should be noted that this shortage comes even as India has produced a record amount of coal this year. Domestic coal-based power generation has grown by nearly 24% this year (till September), according to reports.

Government-run Coal India Limited (CIL) produces 80% of the country’s coal output, and during the July-September quarter, it saw 12.3% growth in the supply of coal to power utilities. 

CIL Marketing Director SN Tiwary reportedly said the company is looking at improving coal stocks, and that demand was “far outstripping supplies now”.

Coal India also said that it had to increase supply during the July-September quarter as plants that source coal from overseas had curtailed production. 

CIL reportedly said that it builds up coal inventories at power utilities during the first quarter but could not this year because it was hampered by the pandemic, and extra stocking was not possible. CIL added that extended rain at coalfield areas interrupted both production and supplies. 

Factors that led to crisis

> Lack of planning

Experts have called out the government over mismanagement, stating it has led to the shortage.

Sunil Dahiya, an analyst at the Centre for Research on Energy and Clean Air, tells TNM that it was clearly mismanagement and not a crisis of resources or coal quantity. “We have more than enough coal mining capacity. We don't need to open up any new coal mines to cater to that coal demand now or even in the next coming years. It is clearly mismanagement, or lack of foresightedness by Coal India and the Government of India, which has led to this,” he says. 

He points out that the country had enough stock a few months ago, and officials would have data that showed that stocks were depleting and if they didn’t replenish it, it would lead to a power crisis. The situation, if managed well, can be rectified in a few weeks, he added. 

Sudiep Shrivastava, a lawyer and activist, told TNM the demand for power hadn’t gone up so much that it has outstripped supply — but that stock at the mines and at the power plant have to be differentiated. “Coal not reaching power plants is a logistics issue and has happened because of the rains, but it is not a new phenomenon,” he says. He adds that stock is usually built up, and wasn’t done so in anticipation of a possible third wave of the pandemic, which would have kept demand for electricity subdued.

> Payments

There are large outstanding payments pending to Coal India. According to an answer given in the Lok Sabha by Prahlad Joshi, state-run GENCOs and state-electricity boards owe Rs 21,619.71 crore to Coal India as on March 31, 2021.

According to CEA data, there have been outstanding payments of more than 45 days of power utilities that have to be paid to Central PSUs. According to CEA data, as of August 31, Rs 31,356.75 crore is owed to Central PSUs.

The unpaid dues have added strain to the low stock, as Coal India reduced supplies to those with large outstanding payments. Recently, Power Secretary Alok Kumar told CNBCTV18 that he has written to the chief secretaries of Rajasthan, Maharashtra, Tamil Nadu and Uttar Pradesh repeatedly to clear their dues to coal companies. “...there is a tight situation, but the states who have managed timely coal stocks by paying to the coal companies, are not having such a big problem,” he said. Large outstanding dues became a contributing factor to the current coal shortage. 

> Import prices

In spite of having the fourth-largest coal reserves in the world, India is the world's second-largest importer of coal. In the last two months, global coal prices have increased by 40% and India's imports fell to a two-year low.  A bulk of the country’s imports come from countries such as Indonesia, Australia, and South Africa. Those who relied on imported coal are also relying on domestic stocks. 

“The CEA ought to have certain measures that if the price of imported coal is going up, the demand would go up by a fixed amount and that should have been planned for. It’s more of a management failure and logistics issue than coal availability,” Sudiep says. 

> Other factors

There are also concerns that the shortage is also being used to push the Coal Bearing Areas (Acquisition and Development) Amendment Bill, 2021.  

“They are treating this so-called crisis as a tool to create an atmosphere that we need more coal, more mines, etc,” Sudiep alleges, adding that it is possible that the Union government will use such a crisis to bring in this amendment. 

“They are using this crisis to create an atmosphere, so that when they bring this amendment and similar amendment to dilute forest and environment laws with regard to coal mining, it would be seen as being done in national interest and a critical situation compels them to do this,” he adds. 

Current situation

Now, states have been forced to buy power from exchanges at high rates to meet demand and to defuse the crisis. The Union Power Ministry has issued instructions ranging from asking states not to sell power at high prices on the exchange to ordering state electricity generators to ensure adequate supplies.

The Ministry of Power said in a statement on October 12, that states must serve their consumers first and not sell power on the power exchanges at a higher rate.

Coal India has been asked to augment the coal supply to power producers.

Earlier this month, the government amended the rules to allow 50% sale of coal from captive mines — mines that are owned by companies and are used for a specific purpose. 

Where the southern states stand

Andhra Pradesh: Chief Minister YS Jagan Mohan Reddy sought the intervention of Prime Minister Narendra Modi, and urged the PM to direct coal and railway ministries to allot 20 coal rakes to thermal stations, and banks be instructed to provide working capital loans liberally to DISCOMs (distribution companies) till the crisis is tided over.

"In Andhra Pradesh, the post-COVID-19 power demand increased by 15%  in the last six months and by 20% in the last one month, coupled with coal shortage is pushing the country's energy sector in turmoil," Jagan said, stating that circumstances are pushing the state towards load shedding.

Kerala: Kerala Electricity Minister K Krishnankutty has said the state government may have to resort to load-shedding in case the shortage of power from the central pool continues for a long time. He said the state has been experiencing a shortage of 15% of power from the central pool due to the closure of four thermal stations because of the coal shortage. Officials reportedly said that if the shortage goes beyond 20%, then the department will have to think about load-shedding. The KSEB was also planning to encourage consumers to finish more of their work during the daytime, and reduce consumption during peak hours of 6pm to 11pm.

Karnataka: Chief Minister Basavaraj Bommai has asked the Union government to increase coal supply, but has downplayed fears of a crisis.

Tamil Nadu: TANGEDCO has maintained that there will be no power cuts for now. According to IANS, a senior officer said that consumption is less due to the monsoon, and if it continues to receive the current level of supplies, it will be able to make it without power cuts. However, according to the Business Standard, TANGEDCO-run power plants had 3.8 days of stock

Telangana: While there were reports that Telangana GENCO could be seeing a shortage, for now the state has affirmed that it is not facing a shortage. Singareni Collieries has also reportedly said that the thermal power plants it has coal linkages will be supplied with coal as per agreement. 

With inputs from PTI

Related Stories

No stories found.
The News Minute