According to officials and economists, India is likely to see more power cuts this year 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 could impede industrial output just as the sector was beginning to recover after months of COVID-related lockdowns.
According to a Reuters examination of official statistics, the lack of electricity as a proportion of demand has 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 the data, 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 at least 2014. According to federal rules, power plants should have at least 24 days of stock on hand on average.
“The issue is that, despite Coal India and the Coal Ministry’s repeated requests for power plants to stock up, the utilities continued to reduce their stockpiles,” 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, said on Monday that it will reduce output by 50%.
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 more than 3% apiece.
“A proportionate rise in electrical generation to satisfy the increasing demand is improbable,” Fitch Ratings wrote in a note on Thursday.
Coal contributes for over 75% of India’s electricity generation. The supply situation is being exacerbated by a scarcity of trains that bring coal to power facilities. The Indian Railways commits 415 trains per day, which is 8.4 percent less than the 453 required by the utilities. According to the minutes of a meeting between the Power and Coal Ministries last week accessed by Reuters, the actual number of trains available from April 1-6 was 379 per day, 16 percent less than required.
Soaring Power Demands in India
Summer is predicted to increase India’s power demand, with weather officials projecting above-normal maximum temperatures in many northern and central districts in April.
“Due to skyrocketing air-conditioning consumption, an extraordinary change in weather has resulted in peak demand shooting up after midnight,” said Harry Dhaul, director general of the Independent Power Producers Association of India. According to a federal Power Ministry paper accessed by Reuters, total power output is expected to climb 15.2 percent 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 percent. Despite record production and supply by Coal India Ltd, which generates over 80% of India’s coal, higher electricity demand has already caused India to reduce coal supplies to the non-power sector this year. Another Power Ministry paper revealed that Coal India is aiming for a 4.6 percent 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.
Fitch Ratings warned that “high international coal costs would limit any meaningful growth in coal imports,” and that domestic supply could be harmed during the yearly monsoon season.