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Coal shortage in India UPSC NOTE

 Electricity shortages in India during summer

  • A shortage of domestic thermal coal, that used in electricity generation, is primarily blamed for the electricity shortage

  • Consider August, the month with the greatest electricity shortage in 2023, though the story is similar even in summer months

  • Electricity shortage in August was about 840 million units due to a poor monsoon.

  • In turn leading to increased demand and reduced supply from some sources

  • It is pertinent that this shortage was just 0.55% of demand that month

  • Moreover, 0.6 million tonnes of domestic coal would have addressed this shortage even as over 30 million tonnes of coal were available in coal mines in August and September

  • This illustrates that the challenge is not really about the availability of domestic thermal coal per se.

  • But of insufficient logistics to move the coal to power plants

  • A recent Ministry of Power advisory corroborates this, saying “supplies of domestic coal will remain constrained due to various logistical issues associated with railway network”.

  • Addressing the logistics challenge would take some time. 

  • Since coal is currently India’s best bet to meet shortages, the obvious answer is alternative sources of coal. 

  • This leads to the second conflation — that the only alternative source is imports. Coal India Ltd. sells about 10% of its production, or 70 million tonnes-80 million tonnes each year through spot auctions. 

  • While the price of such coal is higher than the coal that many plants get, it is much lower than the price of imported coal

  • Though some plants may not have logistics constraints to get coal from the auction sites, even such plants do not consider auctions as an alternative.

Cause of Shortages

  • Not all power plants are the same. 

  • Typically, the plants that generate the most (the so-called pit-head plants) are situated close to mines, far away from ports and do not face coal shortage. 

  • Shortages in periods of high demand are more likely in plants far away from mines which typically do not generate as much. 

  • Thus, there is no justification to interpret the advisory as a mandate to import 6% coal by weight for all plants in the country.

  • Clearly, the discourse around coal shortages in the country needs course correction

  • It cannot be assumed that coal imports are the default way to address shortages

  • The fundamental challenge is to overcome the logistics bottlenecks that are preventing coal reaching the locations where required. 

  • In the interim, regulatory commissions and distribution utilities must ensure that all coal-based plants are alert to the possibility of coal

  • shortages and identify the cheapest alternative sources which may not be imports to bridge the gap

  • Otherwise, the hapless consumer would be left to pick up the tab for inefficient coal procurement.

Upper limit of coal import 

  • Some thermal coal imports to blend with domestic coal may be required even if auctions are used. 

  • The question then is about how much of imports for which coal plants. 

  • The Ministry of Power issued a recent advisory to power generators to continue monitoring their coal stocks until June 2024 and import coal as required (up to 6% by weight).

  • This was widely reported as extending a “mandate” for importing 6% coal. 

  • It is convenient, as some might say, for such advisories to be interpreted as mandates by many coal-based generators.

  • Since the increased costs arising out of coal imports can be ‘passed through’ to electricity consumers via distribution utilities. 

  • Therefore, it is up to electricity regulators, responsible for ensuring prudence of electricity costs, to not interpret such advisories as mandates.

  • There is little justification to treat the MoP advisory as a mandate, given that the letter itself repeatedly uses the word “Advisory” and the operative sentence reads.

  • Moreover, preliminary analysis shows that a mere 0.3% additional blending in addition to the 3.4% imported coal that was blended between April to December 2023, would have eliminated all shortages in that period.

  • Thus, the third misleading narrative is that 6% coal imports are necessary when it is just an indicative upper limit of imports that may be required.



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Learnerz IAS | Concept oriented UPSC Classes in Malayalam: Coal shortage in India UPSC NOTE
Coal shortage in India UPSC NOTE
Learnerz IAS | Concept oriented UPSC Classes in Malayalam
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