Coal shortages at this time of the year have become the norm, but can be better managed
Come September, and coal stocks in thermal power plants typically go down to perilous lows — a situation that usually persists till the end of the year. This time the demand-supply mismatch is acute; there has been a spurt in demand for coal, driven by the pent-up demand of an economy recovering from the pandemic, aggravated by anaemic production in recent times. Hence, April-September output of Coal India Ltd, which accounts for over 80 per cent of India’s coal production, was at 250 million tonnes or 5.8 per cent over last year but the offtake increased from 255 million tonnes in the first half of last year (which was, not surprisingly, 21 million tonnes below the offtake in April-September 2019) to 307 million tonnes — a rise of 20.6 per cent. Meanwhile, CIL’s modest production growth this fiscal comes after two years of stagnant output. The present H1 offtake surpasses the subdued 2019 level of 276 million tonnes by about 11 per cent. Given the shortfall in coal output as well as poor evacuation logistics, the stocks with power plants are generally below the ideal of 22 days even at the start of the fiscal year. They fall during the monsoon months, when rain in the coal mining region makes the mines inaccessible, more so in the open cast mines which account for an overwhelming share of the output. The demand spurt this fiscal has led to a dip in inventories to four or five days’ stock, or about 7.5 million tonnes at present — as reported by this newspaper.
A supply shortfall that occurs year after year needs to be addressed urgently. Coming on the back of spiralling fuel prices, globally expensive and scarce coal (India imports over 200 million tonnes of coal or about 30 per cent of domestic output) could impact the nascent economic recovery and add to inflation, as coal accounts for over half of India’s energy consumption. As generators sputter, Discoms may fall back on purchasing power from the spot exchanges, where prices are likely to rule high. This could lead to higher tariffs. There is also the prospect of high imported coal costs being passed on. But there is a way out. Analysts such as Prayas Energy Group have suggested that a 20 per cent increase in coal output in the summer months, with power plants keeping sufficient stocks right through the year and the Railways working in tandem, can make a difference in the short run. Imports and e-auctions should be well planned. The washeries industry, which became scam-tainted, should be revived to improve efficiency of coal use.
In the medium-to-long term, India should push up alternate energy sources such as natural gas and nuclear power, such that the excessive dependence on coal is reduced. This is besides raising the share of renewables in generation to more than 12 per cent even as it accounts for over a quarter of the total installed capacity of 388 GW. For the present, though, there can be no getting away from addressing inefficiencies in coal which is still the bread and butter of India’s energy needs.