India is on the brink of an energy crisis. Over half of the country’s coal plants are on alert for outages after witnessing a surge in electricity demand coupled with a slump in local coal output eroded stockpiles, reported Bloomberg.
Power stations in India reportedly had an average of four days’ worth of coal left at the end of September -- the lowest in years, down from 13 days at the beginning of August.
Given nearly 70 percent of electricity generated in India is dependent on coal, spot power rates have increased sharply, as supplies of the fuel are now being diverted away from key buyers such as steel mills and aluminum smelters.
Just like China, India is also battling twin challenges of rising electricity demand due to a post-lockdown rebound in industrial activity and a slump in local coal output. India meets nearly three-quarters of its coal demand locally, which was dampened this year by heavy rains that flooded mines and important transport routes.
Coal-fired plant operators in India now have just two options to overcome this crisis – either pay large premiums at domestic auctions to get whatever local supply is available or dabble in a seaborne coal market where prices are currently at the highest on record.
Meanwhile, the Central government is drawing up fresh guidelines to bring idle power stations back into action if need be.
Pranav Master, Director, Infrastructure Advisory, Crisil Ltd, said: “Until supplies stabilise completely, we are likely to see power outages in some pockets, while customers elsewhere may be asked to pay more for power. Because of imported coal prices shooting through the roof, plants running on domestic coal have had to do a lot of heavy lifting. Things are expected to get better as the rains abate.”
He added the impact of this on consumer prices will reflect within a few months when distribution utilities will get the regulatory nod to pass on the cost to end customers.
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