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Coal and power crisis: Is India headed for a "Blackout?" All you need to know

Coal and power crisis: Is India headed for a "Blackout?" All you need to know

According to experts, a sharp uptick in the demand for electricity from manufacturing and other sectors, and fall in coal imports by 40 per cent, among others, are possible reasons fuelling this power and coal crisis in India.

India has the fourth-largest coal reserves in the world, and heavily relies on thermal power plants to meet its energy demands India has the fourth-largest coal reserves in the world, and heavily relies on thermal power plants to meet its energy demands

Many states have issued warnings about the possible blackouts emanating from the ongoing coal shortage in the country. In response to this news, the centre has assured everyone and called the news of coal stocks hitting the rock bottom level "misleading". But how has India reached such a point, from where an impending power crisis is looming large in front of us? To understand, let's delve deeper.

India has the fourth-largest coal reserves in the world, and heavily relies on thermal power plants to meet its energy demands. In addition to it, the country is also the world's second-largest importer of coal and imports fuel from various countries.  

According to experts, a sharp uptick in the demand for electricity from manufacturing and other sectors; low supply from the coal reserves in the wake of heavy rains in Gujarat, Punjab, Rajasthan, Delhi and Tamil Nadu; increase in power demand in the wake of quicker than expected economic recovery; and fall in coal imports by 40 per cent are some of the factors that are fuelling this power and coal crisis in India. In addition to this, the rise in prices of imported coal that went up from $60/ton in March-2021 to $160/ton in September and October 2021 is also making things worse.

"People are saying that demand went up, demand went up but in comparison to the last year, which was the pandemic year, so obviously our demand will be less last year. The demand is high, but not exceptionally higher, so it is not at a record high or unprecedented," Rahul Tongia, a senior fellow at the Centre for Social Economic Progress, said.

In a bid to push coal production in the country, the government in May 2020, decided to go for the joint auction of coal minerals along with bauxite. The rationale was to boost production to reduce the dependency on imports. Earlier in August, eight coal mines had been successfully auctioned. Now, the government is ready to begin the auctioning process of 40 coal mines.

Along with the above reform, the government also removed the distinction between captive and non-captive mines, allowing the transfer of mineral leases and the sale of surplus unused minerals.

"A recent amendment in captive coal mining rules by the Government of India may help to improve coal supply over the next few weeks. The permission given to captive coal mines to sell up to 50 per cent of their coal output in the open market after catering to internal demand should help to release additional supplies of coal in the market," the ratings agency Acuite Ratings and Research said in a note.

Are we going to witness power outage?

The ratings agency expects a moderate shortage of power supply in the near term with increasing household demand in the upcoming festive season as the dependence on thermal coal-based power plants remain high in India. According to the agency, the coal inventory position is unlikely to improve within a few days. Nevertheless, the agency foresees an impact of the shortage of coal beyond the power sector.  

"Currently, we are in a very sensitive situation, we are not yet at the point of grid collapse, if we do reach that we may see localised load shedding. If a particular plant is running short then that plant will shut down, if enough plants are running short then the next step is to start localized load shedding in local or regional areas," Tongia said.

However, on the other hand, many experts do feel that the government would be able to solve the coal crisis and the possibility of a blackout seems a little distant.

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