Power equations

Coal shortfall poses fresh challenges for the economy

A little over a month after the minister of coal and mines assured Parliament that there was no coal shortage in the country, the power ministry has reportedly told generators to expect a shortfall of more than 20 million tonnes (mt) in the peak summer season of April-June and plan in advance. The data in the ministry’s presentation showed that power demand was expected to hit 229 Gw in April, a sharp rise from last year’s record of 215.8 Gw. Against a requirement of 222 mt to meet this surging demand, the availability of domestic coal through state-owned Coal India, which accounts for 85 per cent of the domestic supply, is 201 mt. This, again, marks a downward revision from the 205 mt of supply the coal ministry had pegged for the first quarter of FY24.

In a situation of surging demand, which could pose fresh challenges for the economy, is the age-old problem of a shortage of railway rakes to transport coal — especially to the high-demand industrial areas of the west and north situated some distance away from the coalfields in the east. Against a demand of 428 rakes a day, the railways will be able to deliver 418 rakes. Apart from this early warning to power producers, the government moved swiftly last month by invoking Section 11 of the Electricity Act to order all imported coal-based power plants to run at full capacity “in the larger public interest”. In addition, despite demands from power producers since last year, the higher coal-stocking norms of 2021 remain unchanged. Under these norms, pit-head power plants were required to maintain coal stocks sufficient to run power stations at 85 per cent of their capacity for 12-17 days. For non-pithead plants, the limit is 20 to 26 days. These orders were passed to prevent the sort of crisis that occurred that year, when 135 coal-based plants had only three to four days’ supply. But the extent of shortage in the first quarter would be a little less than 10 per cent. Early planning for imports can easily meet this shortage, which is not unusual.

The 2021 crisis in coal supply is a cautionary tale because it acted as a drag on the nascent post-Covid economic recovery, especially as power prices rose sharply with a number of states being forced to buy electricity on the energy exchange at premium rates. This year, inflationary pressures from the higher prices of power appear to be baked into the system for two reasons. One is the prospect of higher costly coal imports to make up for the shortfall. The second is a significant relaxation by the regulator on per-unit rates on the energy exchange from Rs 12 per unit to up to Rs 50. It is axiomatic that this impending problem could have been alleviated had India been generating more renewable energy. But a variety of policies — from import restrictions on solar cells to domestic user norms — and technical problems have limited the expansion of this sector. Today, as a result, although wind, solar and other renewable energy sources account for 30 per cent of the installed generating capacity, their contribution to generation has been just 12 per cent. More enabling policies for renewable energy could go a long way towards helping India not only reduce its rising reliance on polluting coal but also alleviate the perennial shortage problem ahead of each exponentially hotter summer.