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The current crisis can be traced to both demand and supply factors. Over the past few weeks, several states — Punjab, Uttar Pradesh, Haryana, Maharashtra and Andhra Pradesh — have been witnessing power outages. While governments, both at the central and state level, are taking steps to address the problem, this is not an unusual situation. Last year too, several states had raised concerns over inadequate coal supplies to thermal power plants. This indicates a systemic inability to predict demand accurately and manage supply-side constraints.
The current crisis can be traced to both demand and supply factors. Power demand is rising as the economic recovery from the lows of the pandemic gathers momentum. Demand is only likely to rise further as the country heads into peak summer season, deepening the existing mismatch. On the supply side, the low level of coal stocks at thermal power plants is a matter of concern. As per a recent report by Nomura, during mid April, power plants held only about nine days’ worth of coal stocks, significantly below the average stocks held by them over the past few years. In fact, a large section of thermal power plants across the country are currently at “critically” low level of stocks. This, as analysts have pointed out, is due to a combination of factors — notably, the lower availability of railway rakes to transport the coal to the thermal power plants, and high prices adversely impacting coal imports. As reported in this paper, with a sharp spurt in international coal prices, Indian thermal plants, which rely on imports, have cut back — of the 16.6 GW of thermal power generation capacity based on imported coal, 6.7 GW or around 40 per cent is currently not operational.
Considering that coal supplies tend to get disrupted during the monsoon season, unless these supply-side issues are tackled urgently — there are reports of some states, namely, Maharashtra, Gujarat and Tamil Nadu, planning to import 10.5 million tonnes of coal over the coming few months to address the deficit — the mismatch is likely to worsen. This will exacerbate the power shock across the country, forcing states to either buy power at significantly higher rates or face outages. However, initiatives by the Centre and the states aimed at tackling these constraints will only address the immediate stress. The larger issues of the weakness in the distribution segment, may well linger on.
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