Coal crisis in India

Coal crisis in India

  • India is facing a severe coal shortage. Background:
  • India is the second-largest importer, consumer and producer of coal, and has the world’s fifth-largest reserves. It mainly imports from Indonesia, Australia and South Africa.

How bad is the situation?

  • The situation is “touch and go”, and could be “uncomfortable” for up to six months.
  • The coal stocks at its thermal power plants can supply just days of fuel.
  • On October 1, the power ministry said that the 135 thermal power plants in the country had only an average of about 4 days of coal stocks left.
  • This is worrisome because coal-fired plants make up nearly 70% of India’s power source mix.

Reasons for the shortage:

  • Heavy September rains in coal mining areas hit production and delivery and plants failed to build up their stocks pre monsoon.
  • Diamond had outstripped supply, despite increased buying from coal india.
  • Sharp fall in imports due to high prices.

Impact of the shortage:

  • If industries face electricity shortages it could delay India’s economic reopening.
  • Some businesses might downscale production.
  • India’s population and underdeveloped energy infrastructure will mean the Power Crisis could hit long and hard.

What next?

  • Coal India and NTPC Limited are working to raise output from mines.
  • The government is trying to bring more mines on stream to boost supply.
  • India will need to amp its imports despite the financial cost.

Recent Reforms in coal sector:

  • Commercial mining of coal allowed, with 50 blocks to be offered to the private sector.
  • Entry norms will be liberalised as it has done away with the regulation requiring power plants to use “washed” coal.
  • Coal blocks to be offered to private companies on revenue sharing basis in place of fixed cost.
  • Coal gasification/liquefaction to be incentivised through rebate in revenue share.
  • Coal bed methane (CBM) extraction rights to be auctioned from Coal India’s coal mines.

Challenges Ahead :

  • 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.
  • Commercial primary energy consumption in India has grown by about 700% in the last four decades.
  • The current per capita commercial primary energy consumption in India is about 350 kgoe/year which is well below that of developed countries.
  • Driven by the rising population, expanding economy and a quest for improved quality of life, energy usage in India is expected to rise.
  • Considering the limited reserve potentiality of petroleum & natural gas, eco-conservation restriction on hydel project and geo-political perception of nuclear power, coal will continue to occupy centre-stage of India’s energy scenario.

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