Analysis of Sansad TV Discussion: The Coal Crisis-Ground Reality

Table of Contents

Context

The govt has informed the Parliament that there is no shortage of coal in the country and Coal India Ltd has said that it does not foresee any shortage of dry fuel for power producers till March 2022 as it is focusing on ramping up production to secure a stock of about 70 million tonnes by end of the current fiscal.

Background

In early October Coal-fired power stations, which produce 70 per cent of India’s power, announced they had an average of four days of coal left, the lowest in years. (As recently as August this year, these power plants had reported having 13 days of stock.)
With stocks reduced to almost nothing, many states, including Delhi, Punjab and Rajasthan warned of potential blackouts.
Rajasthan, Punjab and Bihar have already resorted to load shedding.
The Centre has also stepped in, channelling the output of Coal India Limited (CIL) to power plants. Despite this, there has been widespread concern that the current situation could balloon into a full-fledged energy crisis.

Importance of Coal in the Country

Coal is the most important and abundant fossil fuel in India.
It accounts for 55% of the country’s energy needs.
The country’s industrial heritage was built upon indigenous coal.
Hard coal deposits spread over 27 major coalfields are mainly confined to eastern and south-central parts of the country.

Sources of India’s Coal Production

As much as 80 per cent of India’s coal demand is met from domestic production.
While India’s total demand for coal in 2020-21 was around 906 million tonnes, domestic coal production was 716 million tonnes.
A bulk of India’s coal imports (43 per cent) are from Indonesia, followed by Australia (26 per cent), South Africa (14 per cent) and the US (6 per cent).
CIL has a near-monopoly in domestic production, and along with its subsidiaries, accounted for 596.25 million tonnes of coal production in 2020-21.

How did the crisis come about?

One reason being cited is the uptick in economic activity—in a nutshell, that a surge in power demand resulting from the economy’s opening up (and the festive season, ongoing in many parts of the country), has led to an increased demand for coal, straining resources and burning through stocks faster than expected.
India has a total installed capacity of 3.88,849 MW of power, with the private sector the biggest player, generating 48.2 per cent of total output.
The central and state sectors produce 25.2 per cent and 26.6 per cent, respectively.
With the economy reopening, total power demand in August rose to 124 billion units from 106 billion units in the same month in 2019.
According to Crisil, India’s daily electricity consumption crossed 4 billion units, resulting in an 18 per cent spike in coal consumption in August-September, compared to the corresponding period of 2019.
At the same time, international coal prices have seen a sharp rise due to a coal shortage in China as authorities enforced strict pollution laws ahead of the winter Olympics in Beijing in February next year.
Indian power plants also accumulated lower stock this year as heavy rains in September in coal-bearing areas hit production.
Similarly, coal imports took a beating after heavy rains in Indonesia impeded production.
As a result of all these factors, when coal stocks at power plants declined continuously for three weeks, panic began to set in.

Central Government’s view on recent Coal Crisis

As per the government, there is no shortage of coal in the country. Due to increased demand of power, less power generation by imported coal-based power plants and some interruption in the supply of coal due to heavy rains, the coal stock at the power plants depleted to 7.2 Million Tonnes (MT) (sufficient for 4 days) as on 8th October 2021.
Subsequently, with increased coal supplies, the coal stock has started increasing and has now reached 18.5 MT (sufficient for 10 days) as on 05.12.2021. Coal India Limited (CIL) has dispatched around 64 MT more coal during April – November’21 in comparison to the same period of last year. CIL has dispatched 421.11 MT coal during this period, against 357.13 MT during the same period of last fiscal.
As per the current import policy, coal is kept under Open General License (OGL) and consumers are free to import coal from the source of their choice as per their contractual prices on payment of applicable duty.
In view of limited domestic production of coking coal, coking coal will continue to be imported for use by the steel sector.
Thermal power based on domestic coal may use imported coal up to 10% for blending with domestic coal, where technically feasible, to meet the increased power demand in the country.

Varied Measures were taken by GOI For Further Increasing Coal Production

Commercial Auction of coal on revenue share mechanism
Allowed sale of excess coal production
Rolling auction: In order to expedite the process for conducting an auction and to carry out more rounds of the auction in a year, a mechanism of rolling auctions of coal mines has been planned. Under this mechanism, upon completion of the electronic auction process of a tranche, the next tranche of the auction would be launched for the following mines:
a. Mines where no bid or only a single bid was received in the previous tranche of auction (except for those mines where the Ministry of Coal decides to go for a second attempt of the auction).
b. New mines, if any, identified by the Ministry of Coal.
Single Window Clearance: The Union government has already launched the Single Window Clearance portal on 11.01.2021 for the coal sector to speed up the operationalisation of coal mines.
Coal India Ltd. has envisaged a coal production programme of one Billion Tonne from CIL mines by the year 2023-24.

Way Forward

The centre should have effective dialogues with coal-producing states to give coal production a boost rather than engaging in political blame games.
Meanwhile, CIL needs to bring in more modern technology to boost the efficiency of its operation.
The other issues that need to be addressed include easing the litigation deadlock on private participation in coal mining, fast-tracking clearances including environmental clearances and improving rail infrastructure to speed up transportation.
Unless such issues are addressed, the coal shortage could continue to simmer and eventually flare up into a full-fledged energy crisis.