Sudarshan Varadhan

CHENNAI (Reuters), Indian utilities scramble to secure coal supplies after critical low inventories due to a spike in power demand from the industries. Slower imports as a result of record global prices have pushed power plants to their limits.

Government data shows that more than half of India’s 135 coal-fired power stations have fuel stock levels of three or less days. This is far below the federal recommendations of two weeks.

India’s coal shortage crisis https://graphics.reuters.com/INDIA-COAL/SHORTAGE/zdvxoddbapx/chart_eikon.jpg

Globally, power-generation fuel prices are rising as electricity demand rises and tightens supplies of coal.

India faces competition from buyers like China. China is the largest consumer of coal in the world and is being forced to increase imports due to a serious power shortage.

The rise in oil, power, and gas prices is causing inflation across the globe and slowing economic recovery following the COVID-19 Pandemic.

“The supply crunch is expected to persist, with the non-power sector facing the heat as imports remain the only option to meet demand but at rising costs,” ratings agency S&P’s unit CRISIL said in a report this week, adding it expected Asian coal prices to continue to increase.

“Coal inventories at Indian (Indian) Thermal Plants will increase only slowly by March next year.”

Indian power producers who are locked into long-term contracts with utilities can’t pass higher input costs on unless there is a provision to do so.

Utility officials and traders said that the high price of imported coal has slowed power plants’ purchase plans. No tenders were posted by major coal import state utilities to seek new cargoes on their websites this month.

The coal prices of major exporters have shot up to all-time records recently. Prices in Australia rose by roughly half and Indonesian prices increased 30%.

According to Reuters calculations, the September Indonesian coal benchmark price was seven times more than comparable quality fuels sold by Coal India for Indian utilities.

Coal India spot auctions buyers are earning a lot of money. “They are selling at 50-100% premiums,” stated a senior Indian official responsible for sourcing coal.

Coal India’s state-run subsidiary said this week that higher international prices for coal and lower freight rates had made it more difficult for utilities to produce enough power. It has also increased dependence on coal-fired units.

India is the third largest country to import coal, even though it has the fourth-largest reserves. Three-fourths are consumed by utilities, and Coal India accounts for more than 80%.

India coal imports by supplier https://fingfx.thomsonreuters.com/gfx/ce/gdpzyqlqrvw/IndiaCoalImportsbySupplier.png

INDUSTRIAL PURGE

India’s power stations are facing increased demand from various industries, as the economy recovers from the recent wave of COVID-19.

A Reuters analysis of the data provided by federal grid regulator POSOCO revealed that power consumption in industrialized states like Maharashtra and Gujarat, as well as Tamil Nadu, grew between 13.9% to 21% during September.

These three countries account for almost a third India’s annual electrical consumption. Half of India’s electricity consumption is generated by offices and industries. The residential and agricultural sector were the main drivers of electricity consumption in the quarters ending March 2021.

India’s industrial states driving power demand https://graphics.reuters.com/INDIA-COAL/POWER/lbpgngeglvq/chart_eikon.jpg

Shahmeena Husain (Managing Director, Gujarat’s electric regulator), stated that “this year we saw a tremendous rise in industrial demand.”

POSOCO data revealed that while there have been no large-scale power outages in India this year, the deficits have gone up nearly fourfold over last year’s negligible level.

Data showed that the shortages were mainly limited to north states like Uttar Pradesh and Bihar.

    “Domestic consumption increased by about 10% in the last two years because of work from home and air conditioning,” a senior Tamil Nadu government official told Reuters.

    “Following opening up of industries after the second wave, industries are king,” the official said.