India is currently in the midst of an energy crisis as only four days of coal reserves are left. 63 of the 135 powerplants that run on coal energy have two days or less of coal supply India’s Central Electricity Authority said in a report on Tuesday.
The report further said that stocks at 17 of these plants have gone down to zero.
These plants won’t necessarily go offline, but they can be badly affected if there is any disruption to coal supplies.
India’s power minister R.K Singh told the Indian Express newspaper that the situation might not be comfortable for the next five to six months.
According to a ministry statement, Coal India Limited has been asked to increase production.
WHY IS THE SHORTAGE OF COAL WORRYING FOR INDIA?
- Nomura’s analysts Sonal Varma and Aurodeep Nanda have said that with power demand likely to rise amid the continued economic normalization and upcoming festive sales, supply-side disruptions pose a significant near-term downside risk to growth momentum.
- India gets most of its energy requirements through imports from other countries, so if the international prices rise, then India will need to shell out more money for Coal, crude oil and natural gas.
- India imports most of its Coal from Indonesia, but the benchmark prices have increased by over 171% this year.
- Abhishek Jain, chief market strategist Equities, told Business Insider that he hoped the prices in Indonesia would tone down in the next three to six months or it would lead to a massive impact on the long-term profitability of Indian companies.
- When companies’ expenses rise, they pass on the extra cost to the consumer. It might affect everything from everyday items to cars and bikes. Take, e.g. fuel. The rising cost will first impact its transport, and eventually, consumers will have to pay the price.
- The coal shortage will not affect your light bill in the short term, but if the shortage lasts for a long time and the prices rise, it might affect the tariffs.
- Right now, the price of Coal for power plants is fixed for 85% of the demand. Price will only increase for power producers who buy it online via auctions, said Rupesh Sankha, vice president at Elara Capital.
Currently, the price charged by coal India for buying Coal is 1500 per ton. For e-auction and import, the price is 2,200 per ton and 6000 rupees per ton, respectively.
Tata Power, Adani Power and NTPC are the power plants that import Coal, and they cannot pass on the extra cost to state power plants that are their customers or might end up making a loss.
CONCLUSION
A power shortage in China has already triggered blackouts for many households. Factories, too, were forced to cut production, slowing down the Chinese economy and placing a strain on global supply chains.
India will face a similar situation if coal supplies are not met; after all, accounts for 70% of India’s electricity generation.
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