Sharing is caring!

A Statement in the Context of the Coal Shortage

October 11, 2021: India’s power ecosystem, which depends overwhelmingly on coal to meet the country’s baseline electricity demand, is suddenly faced with an acute coal shortage. Even when the Coal Ministry tried to play down the coal shortage saying the fears are “entirely misplaced”, many states like Maharashtra and Tamil Nadu are facing a crisis, with more and more power generation units temporarily shutting down due to shortage of coal. A sudden rise in electricity demand in the last few months because of resumption in economic activities, poor planning by the power ministry, lower domestic coal production because of a late monsoon (itself a manifestation of changing weather patterns) and the rising prices of alternative fuel sources (crude oil, natural gas and imported coal) has India staring down the barrel of a possible extended blackout.

The Central Electricity Authority, which monitors coal stocks at 135 power plants across the country, has published data showing that coal stockpiles are running at all time lows. These 135 power plants have a cumulative capacity of about 165 gigawatts and currently only have sufficient coal to keep running for under 4 days, against a prescribed fuel stock of 14days. This indicates poor planning by India’s existing energy ecosystem, especially when a post-covid economic recovery was imminent.

But the government has so far chosen to keep citizens in the dark about the extent of the shortfall in electricity generation we must expect or the impact it will have on daily life. Anecdotal evidence shows that richer urban neighbourhoods and large businesses are stockpiling on diesel to run their private generators, reinforcing the existing divide in energy access between the rich and poor, between urban and rural, and between different states.

This crisis is an opportunity to look at the failures of our electricity ecosystem. Transmission and distribution losses in India’s electricity ecosystem are criminally high – averaging at 20% all-India against the global average of about 8%. That means that a fifth of all electricity produced in India is lost or goes unpaid. Long-term interventions to correct this situation will not only bring efficiency but also improve the financial situation of publicly owned distribution companies.

We have been consuming and expanding coal as if it is an indefinite source of energy, while scientists and activists have been warning that it is not and that we need to cut down on consumption and look beyond coal for more sustainable energy sources. This crisis was waiting to happen. The climate crisis is no longer just a concept; it is here and now. Extreme weather conditions, frequency of “natural calamities” and faster desertification indicate that, among many other signs.

Blaming the coal crisis on the rapid expansion of and support to renewable energy is missing the point. While the utility scale expansion of RE projects is plagued with social and environmental issues, the crisis should not be used to shoot down RE, which when properly deployed is more sustainable in the long run.

This crisis should also not be used to promote other sources like natural gas. Rather, this should be used to rethink the energy path we have selected and transition to a more sustainable and less damaging one. When the government is singing the chorus of privatisation and monetisation by selling off national assets, the crisis in the coal sector should not be used to push the privatisation of Coal India Limited. The piling NPAs in the coal and power sector is a clear indication of ineffective management by existing private players.

A decentralisation of power generation to off-grid mechanisms that can reduce India’s vulnerability to price shocks in the global commodities market, supply chain constraints or changing geopolitical considerations. Decentralised systems like rooftop solar and open access solar farms for industrial electricity consumption can help individual users move towards private energy self-sufficiency. The government needs to make sure that decentralised systems are also socially, financially and environmentally viable. The recent investments in Waste to Energy projects ignore the long history of the failure and inefficiency of these projects along with their high contribution to pollution. For decentralisation to work, union and state government policies that promote this must be aligned and implemented in a time-bound manner.

We must also place the current shortage that India is facing against the global context. Coal supply shortages are pushing up prices of fossil fuels across the world and energy importers competing for supplies have moved benchmark prices to record levels. An acute shortfall in China has hit industrial production while cities are turning off traffic lights to reduce consumption. In Europe, rising prices of imported fossil fuels are causing fears of a dramatic rise in household energy bills during the winter, where natural gas is a key heating fuel.

Experts predict that India may not be heading to a blackout of this magnitude. But a supply shock in coal is not an argument against a transition to cleaner energy sources, especially at a time when the country witnessed a protest march against coal mining in Chhattisgarh by villagers who have been fighting for over a decade against the coal mining projects that are threatening to displace their lives and livelihoods. It is an opportunity to reconsider the priorities of our energy ecosystem and make interventions for positive change to keep pace with the increasing disruptions that the climate crisis is predicted to pose for us.

Centre for Financial Accountability

Centre for Financial Accountability is now on Telegram. Click here to join our Telegram channel and stay tuned to the latest updates and insights on the economy and finance.

Help us in
* Demystifying finance to common people
* Making financial institutions transparent and accountable
* Spreading financial literacy programmes

Related Stories

guest
0 Comments
Inline Feedbacks
View all comments