By K Raveendran
The worst fears have come true about problems in coal availability developing into a full-blown energy crisis. As most parts of the country sizzles in heat wave conditions, there is unprecedented draw down on available power, leaving gaping gaps in supply. Some states are going through power cuts of up to 8 hours and the coal situation with the majority of power plants is precarious. Delhi power minister raised an alarm that the capital power plants are left with only one day’s requirement of coal. The government has mounted a crash programme to replenish supplies and the railways have cancelled over 750 trains trips to facilitate coal movement. But with supplies leaving big gap in terms of requirements, the crisis is all set to continue.
Inventories with the power plants at the beginning of this year were just enough for nine days, as opposed to a federally-recommended 24 days. This was stated to be the lowest since 2014 and instead of registering an improvement, the situation has progressively deteriorated, thanks to both domestic as well as international developments. Last year’s excessive rainfall, particularly in the states of coal producing states such as Jharkhand, Odisha, West Bengal, Bihar, Chhattisgarh, Telangana and Madhya Pradesh, hit production significantly, leading to lower supplies from Coal India, which provides bulk of the power plant requirements.
India is among the victims of Putin’s weaponization of energy, although not to the extent that some of the other countries, particularly European, have been subjected to. The weaponization has altered the basic structure of global energy complex, with the existing order in terms of prices, transactions, demand-supply as well as energy geopolitics having undergone radical shifts. The Russian invasion of Ukraine has upset all calculations relating to energy, whether oil, gas or coal.
There are at least 12 power plants in India that run exclusively on imported coal and all these are starved of the coal to power their generators, which is also contributing to the current power crisis. India is not enforcing the west-called sanctions against Russia, but that is no consolation as international coal prices are at their historical highs.
The European and western embargo against Russia has meant placing a premium on coal from other sources. India imports its coal mostly from Indonesia, Australia and South Africa, but with European consumers scouting around for new sources, the demand-supply equations have changed, putting further pressure on prices. Indian coal imports have come down drastically ever since the price realisation for the commodity has spiked.
The EU ban comes at a time when the international coal market is already very tight. This has been accompanied by a surge in coal demand in Asia, as countries try to minimize imports of expensive natural gas, sending prices soaring further. New benchmark trades have occurred at more than $400 a tonne, as against a mere $70 per tonne that prevailed one year ago.
Since coal moves in tandem with other energy sources, particularly natural gas, there are indications of further volatility as Russia has turned off the gas taps to European nations, pushing up the overall power prices. It is feared that as European countries look for alternatives, the price of coal, gas and carbon, and consequently power, could see significant upward movement in the short term.
The immediate impact of the announced gas shutoffs from Russia to Poland and Bulgaria on power markets has so far been limited, as gas makes up relatively low shares of total power generation in the countries, at 10 percent and 4 percent respectively. Gas is still the most expensive source of power generation on average in Europe and is, therefore, the main driver of overall power prices.
Western nations are hoping that Russia’s overdependence on fossil fuel revenues will hold Putin back from some of his desperate actions, including a planned insistence on rouble payments for gas supplies. Both sides are, in fact, looking for workarounds so that supplies could be maintained without either side needing to make compromises on their respective political positions. (IPA Service)
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