The depth of India's power crisis

• About 22 power plants have shut down due to shortage of coal.
• Despite this, the union power ministry says the fear of power crisis in India is overblown.
• Maharashtra claims that electricity is being sold as high as ₹20 per unit on power exchange, even though it was priced at ₹3.7 in May.
• Punjab, Tamil Nadu, Karnataka and three other states are facing power crisis.

At least six states of India are currently facing power cuts, while Maharashtra, Delhi and Kerala are closely staring at it. Even though the government of India has time and again assured that it won’t let it come to that, the fact of the matter is that about 22 power plants have shut down due to shortage of coal.

Even the coal that is available is being sold at exceedingly high costs. If the situation doesn’t improve India is starting at a grave situation.

Source: Media reports

According to data shared by the Central Electricity Authority of India on October 5, nearly 80% of the country’s coal-fired plants were in critical or “supercritical” stages. This meant that these coal reserves had coal reserves to only last less than five days.

The electricity authority has not shared any updated information since then.

Government says there is no coal shortage

The union power ministry has called the fear of power crisis in India overblown, while the ministry of coal has emphasised that "ample coal is available in the country to meet the demand".

However, the government and the ministries have taken cognizance of the matter and the sensitive situation in several states. The Indian government has reportedly asked thermal power units to restart the discontinued practice of blending 10% imported coal over concerns of depleting stock.

On October 12, the ministry of power issued a statement directing state governments to inform the central government in case of power surplus, so that this power could be transferred to other “needy states.” They also prohibited states from selling power to states at a higher cost.

Power ministry jumps in to cut the cost

Kerala and Maharashtra are two such states that have come forward to confirm that they have been purchasing electricity at higher prices. “We have a thermal generation of around 14,000 megawatts and due to the shortfall, we have to purchase electricity from the power exchange at exorbitant costs which is as high as ₹20 per unit,” Maharashtra State Electricity Distribution Company Limited (MSEDCL) Managing Director Vijay Singhal said.

The average spot power price stood at ₹3.70 per unit in May 2021.

Source: Media reports

Several regions, including Delhi and Maharashtra, have advised consumers to use electricity judiciously as power supply is at a critical level.

The problem doesn’t end with coal

According to Rupesh Sankhe, vice president at Elara Capital, fuel supply agreements (FSA) — which fixes the cost of coal charged by Coal India while selling to power producers — price is ₹1,500 per tonne while e-auction price ₹2,200 per tonne, imported coal ₹6000, adjusted for calorific value, Sankhe added. e-Auction for sale of coal to other buyers, including traders.

Tata Power is one of those power producers that import coal. The company reduced its production capacity to 20% in June quarter in its coal-based power plant at Mundra — which supplied electricity to Gujarat, Punjab, Rajasthan, Maharashtra and Haryana. This was done to avoid large losses.

India is staring at a grave situation if things don’t get better soon. Especially because coal isn’t the only thing that one needs to worry about. The prices of other power sources like crude oil,
and natural gas have been spiking too, which has the potential to depreciate the value of rupee.

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