Poor management of coal supply triggers a crisis

Six months after India went through a severe power crisis because of the coal shortage, there is yet another similar situation. Long spells of power outages have hit several states, not just the northern states reeling under a hot wave. These are Uttar Pradesh, Maharashtra, Madhya Pradesh, Rajasthan, Haryana, Tamil Nadu, Karnataka, Punjab, Jharkhand, and Bihar.

Thermal power plants generate 73.9% of total electricity in India (Energy Statistics India 2021) and hence, any disruption in their production would hit the production of goods and services in the economy – dragging down economic recovery.

States have been complaining about coal shortages and alerting about the impending crisis for more than a month. Instead of acting on their concerns swiftly, Coal Minister Prahlad Joshi dismissed their distress calls, stating on March 26, 2022: “There is no coal shortage in the country. Electricity production has not decreased anywhere due to the coal shortage.”

The same day, his ministry issued a statement saying: “With the considerable increase in domestic coal production, India has achieved a significant reduction in import of coal despite a surge in power demand.” It said the overall domestic coal production had increased by 8.38% by January 2022, as against the corresponding months of FY 20.

All these would suggest that there is no shortage in coal production or availability of stocks but it is a matter of proper monitoring and managing the supply. A special unit of the Central Electricity Authority (CEA) is dedicated to doing this on a daily basis, apart from monitoring by the Coal Ministry and PSUs running thermal plants. Poor supply was also the major cause of coal shortage in October 2021 and yet, no lessons were learnt.

The fallout has been equally shocking.

On April 29, 2022, more than a month after the coal minister reassured about coal production the Centre did the unthinkable. It cancelled 657 mail, express and passenger trains for a period of up to one month (May 25). A few days later, on May 4, the Railways announced that it had deployed 86% of all open wagons to ferry coal alone. On May 5, the Railways cancelled more passenger trains on May 5 to take the tally of cancelled trains for a month to 1,100 – causing massive disruption in the movement of people in the country.

Both moves are unwarranted and unwise given their adverse impact on the intra-state movement of migrant workers as well as the movement of goods other than coal. Restricting both hits economic recovery.

Massive coal shortage

Despite all these, there is a massive coal shortage across the country. As of May 3, 2022 (the last available update), the daily coal-stock report of the Central Electricity Authority (CEA) reveals that only 34% of thermal plants using domestic coal have the required “normative” stocks of 17-26 days. That is, only 34% of the thermal plants have the minimum days of stocks required for uninterrupted power production, called “normative” stock. The “normative period varies between 17 days and 26 days, depending on logistics and other factors.

Of these thermal plants (running on domestic coal), 87 have a “critical” level of coal stocks, meaning they have less than 25% stocks. The thermal plants using imported coals fare even worse with only 28% having the “normative” stocks of 26 days.

The worst-hit states are West Bengal (5%), Tamil Nadu (7%), Andhra Pradesh (10%), Jharkhand (11%), and Madhya Pradesh (12%), Uttar Pradesh and Karnataka (14% each) and Maharashtra (15%). The percentages in the parenthesis show the required or “normative” stocks in the thermal plants operating in these states.

India’s installed capacity of thermal plants running on domestic coal is 183 GW (90% of thermal plants) and on imported coal 17.3 GW (or 8.5%). Eight thermal plants with an installed capacity of 3 GW (1.5%) are currently not in operation.

When the coal shortage hit in a big way in October 2021, the Centre said there was enough coal and nothing to worry even as several states, Uttar Pradesh, Maharashtra, Karnataka, Gujarat, Punjab and Andhra Pradesh, were consistently reporting outages in their power supply due to coal shortage since mid-July 2021. Then, the shortage was attributed to the monsoon (wet coal stocks at pitheads). An investigative report at the time had revealed that Coal India had alerted the Centre well in advance about the impending crisis, in February 2021, because of disruption in coal production (prolonged lockdowns) and sudden peaking of demand later in the year.

And yet, in October 2021, when Tata Power warned its consumers of a break in supply of power, Power Minister RK Singh reacted angrily, issuing a threat: “I’ve warned Tata Power CEO of action if they send baseless SMS to customers.”

Boost in coal production

Over years, the Centre has taken several steps to increase coal production. One is to privatise coal mining. In 2020 and 2021, more than 100 coal mines were auctioned to private enterprises in two tranches. Private enterprises were also allowed to operate 35 coal mines allotted to public sector undertakings (PSUs), between 2015 and 2020.

The coal ministry says the domestic coal-based power generation has increased by 12.6% by January 2022, over the corresponding months of FY20 and that imported coal-based power generation has reduced by 55% during the same period. Imports of all grades of non-coking coal have come down by 23.3%.

Meanwhile, the demand for electricity jumped to a record high in April 2022 as norther states reeled under the hottest pre-summer month in decades, triggering a severe power crisis. An analysis of official data showed the demand went up by 13.2% to 135 billion kWh in the month, with demand in northern states growing between 16% and 75%.

Coal supply has also been impacted because of large outstanding dues of thermal plants to Coal India – the largest coal supplier. According to reports, as of April 8, 2022, state-run thermal plants had total outstanding dues of about Rs 7,918.7 crore to the Coal India alone, as a result of which the Coal India reduced supply to states with high dues. Coal India also reduces supply when there is inadequate production or not enough railway rakes to meet demand.

These are issues that can be easily resolved with timely planning, interventions and coordination with states without disrupting power generation, or movement of people and goods (other than coal), thereby, disrupting the production of goods and services in the economy.