India’s Coal Shortage: What’s Burning?
If you are reading this from Maharashtra, Gujarat, Jharkand, or any other 12 states facing shortage of electricity, you might want to know there is going to be no respite anytime soon. With coal shortages looming across India and lack of growth of alternative sources of energy, India does not have a way out yet.
Why is this happening?
The most obvious answer is climate change when we overlook nuances. Given the colder winters and hotter summers, we need more central or local heating and greater air conditioning. Even countries like UK have been forced to switch on their erstwhile defunct coal plants to meet this growing demand. However, things are not so simple. With the economy picking up pace rapidly after a prolonged lull, there is a sudden increase in demand for energy to, literally, fuel the economy. In a country like India where 70 percent of energy comes from coal, this is inevitable. To cut the long story short, we will need more coal to generate more electricity which the government, having a practical monopoly in the coal production, transportation and sale to the thermal power plants strewn across the country, is failing to keep pace with.
Our energy minister, R.K. Singh has gracefully acknowledged that we have less than a week worth of requisite coal inventories to meet the power generation demands. However, the blame is passed on to external forces like Russia- Ukraine war which has pushed up the price of coal and lack of appropriate railway infrastructure for coal transport. These reasons do not hold enough weight as domestic coal pricing is in the hands of the state-owned coal India limited (CIL). CIL can hold the price lines. It was well recognised and acknowledged fact that economy will pick up when pandemic was to be a thing of the past. The renewable has been on the government’s plate for a long time now, but it cannot be base load to meet capacity demand. Renewables can supply intermittent energy not constant capacity, and that is a grim reality hitting the industry and commercial business very hard.
So, what is the government really doing?
Ministry of Power has asked domestic coal manufacturers to boost power supplies especially production in ‘captive coal mines’. Along with this, they are also pressing the utilities and private companies to pay up the money to coal companies, which runs into a few billion Rupees at least. The Ministry of Coal is also votary to ease of environmental clearance to accelerate the mining process. In the long run, this might not be a good idea because we are the third largest emitter of greenhouse gas in the world and as per Prime Minsters climate protection commitment, we are obliged to decarbonize our economy to net zero by 2070.
While this plan is executed, the government is resorting to massive firefighting, with increasing lending to coal purchasing entities. There are some poison pills like the Punjab government’s decision to provide 300 units free electricity to all domestic consumers. While this sounds good for political reasons the basic principle of economics tells us it will have an adverse cascading impact on the economy and not sustainable for the state economy. The challenge in front of the government is to maintain a balance between energy affordability and reliability, that too at a time amidst the coal shortages compelling the coal power plants to operate at 50 percent capacity.
Is it time for renewables to kick in: The Karnataka Model
The Karnataka government prides itself in being immune from the ongoing coal crisis. They claim that over 51 percent of their installed capacity comes from solar and wind, and only 34 percent from non-renewables. However, there is a lacuna here as well with respect to the infrastructural damage caused by rain. It is high time we move from building to maintenance mode. They also have a lot of work to do with respect to energy storage systems. Like everyone else we are watching with our fingers crossed and watching whether this state develops as a model for the rest of India.
How will it impact you?
A lot of business-minded individuals wanted to capitalise on the economy's re-opening. Turns out it is too soon to rejoice with majority of the coal supplies being diverted away from the non-power sector. Also, importing coal from the international market will certainly increase import bills, with its price being at a ten-year high. This will have a direct impact on the rising prices. Don’t be surprised if you will be paying extra for day-to-day commodities, at a time when inflation is already high.
The situation in India is not devoid of challenges, however, it is not unprecedented. India has one of the largest coal reserves in India, yet it is dependent on imports. It is time for all stakeholders to pull up their socks and look at the situation from a long term and sustainable lens.
