India’s coal supplies are teetering on a dangerous brink. Power plants across India only have coal reserves for the next four days on average, reported Bloomberg. Half of the country’s power plants are on alert for outages due to the coal crunch. Nearly 55 percent of India’s electricity is generated using coal for fuel.

Supply-demand mismatch

India’s coal woes come at the same time that many nations are facing their own power crises. The reasons for Europe and UK's natural gas shortage, China’s power crisis, and now India’s coal deficit, are the same.

It all boils down to demand and supply.

As the country recovers from the pandemic-related economic restrictions, the demand for power and thus coal has increased at a rapid pace. At the same time, the supply has not kept pace. The slow recovery has also been hampered by heavy rains that have flooded multiple mines and key supply routes, further strangling the inflow of coal from domestic producers.

With supply tightening, power utilities have started relying on coal imports to keep up with the demand. However, as fuel shortages have impacted other nations, especially China, which is the largest consumer and producer of coal, the prices of spot coal have increased at a rapid pace.

Coal India steps in

India’s electricity producers and distribution companies have long suffered from debt and liquidity issues. In the face of high prices of spot coal in the global markets, the companies have had to rely more on domestic producers like Coal India Limited (CIL). The coal producer’s supply to the power sector has already increased by 12 percent in September. Domestic coal suppliers have curbed supplies to the steel and metal sectors in order to prioritise power companies.

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"Reasons aside, the company is fully seized of the imperative need to meet the power sector's demand. With the monsoon on the wane, increased production and availability of more coal will help us stabilise stocks at power plants," CIL spokesperson said.

Average spot power prices at the Indian Energy Exchange Ltd jumped more than 63 percent last month to Rs 4.4 a kilowatt hour.

Better days ahead

While no massive national power outages are expected like the ones seen in China, it will take until the third or fourth week of October for supply to finally start matching demand for coal, experts predicted. The time for replenishing the stockpiles will take much longer, however.

The shortage highlights the need for India to quickly move away from fossil fuel-based energy production, where India is a net importer of energy. Prime Minister Narendra Modi’s policies to encourage the development of hydrogen fuel-based energy generation and a greater share of renewable energy in the country will help India to gradually move away from coal in the long run.

Also read: Explained: Why OPEC did not raise oil output despite global energy shortage​

(Edited by : Shoma Bhattacharjee)