India’s massive fleet of coal-powered plants which generates the majority of the power requirement( over 70%) is facing an acute shortage of coal. This phenomenon is occurring throughout the world as with restoration of normalcy after the pandemic demand has outpaced the supply.
Electricity demand rose by about 10% in July and 18% in August as economic activity rebounded after the devastating second wave. Data from the Central Electricity Authority showed that stockpiles are at the lowest since 2017 with as many as 135 power plants having less than 4 days of coal stockpile, down from the average of 13 days in early August.
This may force the power plants to import expensive foreign coal or buy coal at a premium in domestic auctions, raising power costs in a country that is battling with high fuel prices. The power ministry has said that heavy September rains in coal-mining areas had hit both production and delivery of coal, while plants themselves had failed to build up their stocks prior to the monsoon season.
Coal inventories at Indian power plants fell to around 8.1 million tons at the end of September, about 76% less than a year earlier, according to government data. Average spot power prices at the Indian Energy Exchange Ltd. jumped more than 63% in September to 4.4 rupees ($0.06) a kilowatt hour.
This may cause nationwide power shortages with the prices going up and customers facing power cuts crippling the recovery of the already slow performing economy.