Coal Supply Is Down. Does That Mean Your Electricity Bill Will Go Up?

There is an energy crisis in India. What does it mean for the country & how will it impact your electricity bill?

What Happened?

Anil Swarup, the former coal secretary tweeted saying, that the current power crisis is much beyond coal, and it is the power sector that is collapsing. Swarup added that Coal India Limited unfortunately has become the whipping boy in coal crisis. He also said, “The real problem is with a devastated power sector as UDAY failed.” In another tweet, he said that the tragedy of the present coal crisis was that it was being reduced to a Centre vs State blame game.

His tweet comes after several states have been witnessing power shortage due to a shortage in the supply of coal. For example, the shortage in Maharashtra has led to shut down of 13 units at 7 thermal plants that supply to Maharashtra State Electricity Distribution Company. The Delhi government said that the three plants that supply coal to the national capital have stocks for only one day. The Centre has asked NTPC to provide distribution companies in Delhi with the full capacity of power declared in the power purchase agreement.

During the weekend, Tata Power asked Delhi consumers to use power “judiciously” due to depleting stocks, sparking fears of power cuts and blackouts across the city. Punjab has been seeing power cuts of around 3–4 hours each day. Tamil Nadu Generation and Distribution Corporation (Tangedco) suspended power in several parts of Chennai because of maintenance work, which might be due to the shortage of coal in the city.

Rajasthan is cutting power for an hour daily to make sure coal is not exhausted because of the shortage. Andhra Pradesh is also seeing regular unscheduled power cuts. The Telangana government has said that they have just enough coal for ten days.

Meanwhile, Pralhad Joshi, the country’s Coal Minister said that, as of now Coal India has around 22 days’ stock and supply will further go up as the monsoon is receding. The Minister added that the government was making full efforts to meet the coal demand of power producers.

How Did This Happen?

Commentators told CNBC that a mix of supply factors and declining coal imports led to the current crisis. India witnessed a surge in power demand between April and August. The increase in demand came as the economy regained momentum after a terrible second wave of COVID-19.

Hetal Gandhi, director of research at ratings firm CRISIL, a subsidiary of S&P Global, told CNBC that thermal power companies have had lean coal inventories and did not expect the jump in power demand this year. Other sources of electricity generation like hydropower, gas and nuclear also plunged. Sandeep Kalia, principal analyst at Wood Mackenzie, told CNBC that logistical issues because of the monsoon season also restricted coal supply, in spite of there being enough *pithead stocks available in India.

(*Coal pithead is where the mine is located and usually where the mined coal is kept before being transported to power companies)

Declining Supply

Coal accounts for about 70% of India’s electricity generation, showing how the decline in coal supply would amount to bigger problems. But how did the supply run out? We mentioned earlier about the increase in demand for power after the second wave of the pandemic.

Apart from rising demand, the price of global coal prices also jumped by 40%, making it unviable to import at these high prices since power producers cannot pass on these higher costs to power distribution companies. Since imports decline, power plants that usually depend on imports have now turned to Indian coal, adding more pressure to domestic supplies.

The rains emerged as a problem as well, making extraction and transportation of coal from mines even more difficult. Rains have affected movement from mines to power generation units, impacting power generation in many states, which include Gujarat, Punjab, Rajasthan, Delhi, and Tamil Nadu.

What’s Next?

With the festive season coming up, the power consumption will continue to increase in India, and this is leading to worries whether the country will face massive blackouts in the upcoming days. However, the Ministry of Coal said that India has enough coal to meet power plant demands and that fears of disruption in power supply are “unfounded” and “erroneous.”

The claims about coal shortage might be erroneous, but the power outages across the country are real. The government will have to increase its coal production to meet the demands, and it should raise its imports, in spite of the financial cost. But expensive imports might also mean that the end consumer would have to shell out more money for electricity bills. Let’s hope it doesn’t come to that, especially during the festive season when families already have so many expenses.