Power plants facing acute shortage of coal – here are the 10 points explaining the scenario and what happens next

The demand for coal has been enormous from power companies amid the economic activity trying to match the pre-covid levels. In this regard, why exactly coal companies aren’t much able to supply the black gold to coal-based power plants in India despite high production in the last two months

Here are the reasons a rating agency firm, CARE Ratings lists out amid the demand-supply tussle between power and coal companies in the country.

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1) While power demand grew, the coal-based power plants (in India) could not stock up on the coal inventory ahead of the monsoon season, due to a sharp increase in the international coal prices as well as freight rates.  

2) The pressure on power plants to meet the increased power demand has increased as the country ramps up the economic activity with rising vaccinations and opening-up of businesses.

3) Since domestic coal producers meet just about 60 per cent to 65 per cent of the country’s total annual coal demand, which has apparently led to a high import dependence and the demand far outstripping the domestic supply.

4) The coal stocks with power plants have reached critically low levels of just four days as of the end of September 2021 as against around 22 days of fuel stocks prescribed by the Central Electricity Authority (CEA).

5) The overall coal production during September 2021 has significantly jumped to 33 per cent to 51.7 million tonnes (MT) as compared with 38.9 MT in September 2020. However, the coal production saw a decline of around 4 per cent on a month-on-month basis.

6) Production and despatch volumes of coal have been affected due to heavy rainfall in September 2021 across the mining geographies. Coal production generally slows down during monsoon season and an extended monsoon this September has impacted mining operations.

7) India’s coal production is expected to pick up from October as the monsoon recedes. Demand for coal, on the other hand, is expected to be higher than supply as rising international coal prices will likely keep a tab on imports into the country.

8) The domestic coal companies, including Coal India Singareni Collieries Company will have to significantly ramp up the production from October 2021 in order to achieve the annual production target and to meet the rising demand situation.

9) Global electricity demand rebounded with industrial growth from the post-pandemic boom. However, the coal supply hasn’t kept pace with demand after last year’s pandemic slump.

10) Various pockets of the country are facing power shortage with the majority of the power plants witnessing coal shortage amid less supply and lower production on month-on-month basis.