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India’s Coal supply shortage: How the crisis suddenly began and why

For those who remember the headlines that the current government made, a prominent one was ‘coal surplus’. From 2014 onwards, the BJP government’s clarion call was increasing coal production and improving supply. State-owned monopoly Coal India Limited was given a tall target of 1 billion tonnes of coal production by 2019; three arterial railway lines were started from Odisha, Jharkhand, and Chhattisgarh; and the number of railway rakes for coal supply was to be increased.

Coal India ramped up production by opening new mines. So much that one of its subsidiaries, CCL, was opening a new mine every month last year. This improved coal supply boosted confidence in the government, which then started the programme to reduce dependence on imported coal to nil. This is where the problems began.

During the last financial year, while Coal India was increasing coal production to record levels, takers and the amount of coal dispatched reduced. Financially beleaguered power distribution companies weren’t buying surplus power, and they still aren’t. This led to power plants running at low capacity and, thereby, impacting the coal demand. Demand was so low that the ministry of coal rounded up close to 30 power generating units last year to pay penalty for sourcing coal below their lowest permissible threshold.

At the same time, state-owned NTPC went on a drive to reduce its import dependence. NTPC typically blends 8-10 per cent of imported coal in case of a domestic supply crunch. As Coal India increased production, NTPC was pursued to reduce coal dependence. The thermal power behemoth, which runs 49,000 Mw of coal-based units, reduced its imported coal consumption by 85 per cent as compared to the previous year. This was to be met through domestic coal supply, which Coal India duly complied with. Private units, even those in western India, that were dependent on imported coal shifted their loyalty to domestic coal as Coal India claimed to have a surplus supply.

In August, coal imports fell by 14 per cent over last year to 18.8 million tonne. At the same time, as the private units were running at low capacity, Coal India reduced production. Meanwhile, a crucial railway line (Dhanbad-Chandanpura) broke down and is still under repair. Further, the three planned lines are yet to be fully operational.

Crisis struck once peak summers came. Uttar Pradesh was the first to complain that it was only NTPC that was getting coal, while state-run and private units were facing a scarcity. Next in line came Maharashtra and Rajasthan, which had the same issue, and the latter suffered from power cuts.

By August, the situation worsened with hydropower generation not running at optimum capacity due to weak monsoon. Marred by payment issues and regulatory confusion, wind power faced its worst production year, with 354 Mw produced during April-August 2017.

By September end, average coal stocks at power plants were at a record low of five days. Last year, for the same month, it was 28 days. The number of rakes carrying coal for power sector was increased by the railway ministry. But this led to other sectors such as steel, cement and captive power units complaining of diversion of their rakes for power plants.

As the situation stands now, the ministry of coal has gone on record with the counter that it’s the power plants that should have kept a certain coal stock at their sites. Power plants, however, are alleging mismanagement by the ministries involved — coal, power, and railways. A lack of synchronised approach, they said, has led to this crisis.

Currently, 23 power units with a cumulative capacity of 30,000 Mw have super critical coal stock situation of less than three days, as per Central Electricity Authority. Latest data from ports show that, after five months of straight decline, coal imports have shown a spurt to 18.33 million tonne.

The headlines have gone back to coal deficit. Earlier, states would blame the Centre, the Union power ministry would blame the coal ministry, and the coal ministry would blame railways. For a government that vowed to break down silos, this is the test of cooperative federalism that it claimed to reinstate.
Source: Business Standard

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