Shortage Of Coal And Soaring Demand Would Cause More Power Cuts In India

Shortage Of Coal And Soaring Demand Would Cause More Power Cuts In India
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This year, India is likely to see more power cuts since coal supplies are at their lowest pre-summer levels in at least nine years, and electricity consumption is predicted to climb at the highest rate in at least 38 years.

Power outages in Asia’s third-largest economy might impede industrial activity just as the sector was recovering after months of Covid-related lockdowns.

According to reports based on an examination of official statistics, the lack of electricity as a proportion of demand had risen to 1.4 percent in the last week, surpassing the 1% deficit in October, when India last experienced a significant coal scarcity, and the 0.5 percent shortfall in March.

According to reports, the southern state of Andhra Pradesh, which is home to automakers like Kia Motors and drug companies like Pfizer, has an electricity shortfall of 8.7%, forcing it to resort to extensive power outages.

At the start of this fiscal year, beginning April 1, coal inventories at power plants had an average stock of nine days, the lowest since 2014. According to federal rules, power plants should have at least 24 days of stock on average.

“The problem is, even after Coal India and the coal ministry kept asking power plants to stock up, the utilities kept reducing their inventories,” said Rajiv Agarwal, secretary-general of the Indian Captive Power Producers Association.

Due to the power outages in Andhra Pradesh, Facor Alloys Ltd, a producer of ferrochrome, which is used to make stainless steel, announced on Monday that it will curtail production by half.

Officials added that industrial states like Gujarat and Maharashtra have resorted to load shedding, with government statistics suggesting that eastern provinces like Jharkhand and Bihar, as well as Haryana and Uttarakhand in the north, have experienced power shortages of over 3% apiece.

“A commensurate increase in electricity generation to meet the increased demand is unlikely, limited by the availability of coal,” Fitch Ratings said in a note.

Coal is responsible for about 75% of India’s power generation.

The supply situation is exacerbated by a scarcity of trains that bring coal to power facilities. The Indian Railways commits 415 trains per day, which is 8.4% less than the 453 required by the utilities.

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According to sources citing minutes from a conference between the power and coal ministries last week, the number of trains available from April 1-6 was 379 a day, 16% less than required.

In April, summer is predicted to increase India’s power demand, with weather officials projecting above-normal maximum temperatures in many northern and central districts.

“An unprecedented change in weather has resulted in peak demand shooting up after midnight due to soaring air-conditioning use,” said Harry Dhaul, director-general of India’s Independent Power Producers Association.

According to Reuters’ federal power ministry paper, total power output is expected to climb 15.2% in the fiscal year ending March 2023, with demand expected to rise at the quickest rate in at least 38 years.

According to the letter, this will likely increase coal-fired electricity generation by 17.6%.

Despite record production and delivery by Coal India Ltd, which generates over 80% of India’s coal, higher power demand has caused India to limit coal supplies to the non-power sector this year.

Another power ministry memo revealed that Coal India aims for a 4.6% increase in supply to utilities this fiscal year, to 565 million tonnes, to avoid a shortfall.

However, the power ministry has asked utilities to increase coal imports for blending to 36 million tonnes, the highest level in at least six years, due to the expected increase in power demand.

Due to the Russia-Ukraine situation, global coal prices are trading at substantial premiums to average levels in 2021, which might exacerbate the financial troubles of debt-ridden power distributors.

“High international coal prices would limit any significant increase in coal imports,” Fitch Ratings said, adding that domestic supplies could be hit during the annual monsoon season.

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