Coal Leaving us in dark
Just when the country was facing
soaring inflation, rising covid cases and hike in bank interest rates again, another
complication has stepped up. The citizens of India are now facing power cuts
across various parts of the country especially at the beginning of the monsoon
season due to less stock of coal which is required by power plants to generate
and distribute electricity.
As of now, nearly all major plants are
facing shortage of coal. India being the world’s largest producer and consumer
of coal after China had witnessed the shortage in less than 10 months since October
2021. The capital city Delhi in the month of April, 2022 amid heatwave spells and
maximum temperature reaching 44 degree Celsius across India’s northern region
faced major power cuts at key locations such as the Delhi Metro and Hospitals
due to coal shortage.
Reasons for coal paucity
According to the experts in the power
sector, Scarcity of coal has mixed reasons that have led to such situation and
that is: the impact of Russia-Ukraine War on the increasing prices of the coal,
weak financial health of the power generating and distributing industries,
transportation of coal and lack of management of the stocks at the thermal
plants. As per the norms of stockpiling by the Central Electricity Authority
(CEA) the intensity of the situation can also be measured based on their
distance as follows:
The stock at the power plants can also
be classified as critical or super critical stock of coal based on following
criteria:
Transportation becomes very critical
in such matter as coal is often transported by railways and during the peak
season (January to March), Indian Railways scuffle to transport coal to the
thermal power stations and to maintain ample stockpile to meet high demand of
power during summers. At such period, the production of coal is also increased
by 25% approx.
In India, coal is mainly transported
from Jharkhand, Chhattisgarh and Odisha to different locations in the country
to burn for generating power. With Jharkhand being the coal rich state and the
largest coal reserve, the taxes and royalties of coal mining makes 8% of
revenue for the state government. The dusty and hellfire city of Jharia in the
eastern region of Jharkhand has the largest coal field and has been burning for
more than 100 years leaving with destruction of city and releasing toxic fumes.
But these sectors have also accounted to 10% of employment in the state with
more than 3 lakhs direct jobs and nearly 1 million indirect jobs which includes
illegal miners mostly the villagers.
Major Coal Miners
Coal India Limited (CIL) along with
its subsidiaries such as Eastern Coalfields Limited (ECL), Mahanadi Coalfields
(MCL), Central Coalfields Limited (CCL), Bharat Coking Coal Limited (BCCL),
Western Coalfields Limited (WCL), South Eastern Coalfields Limited (SECL) and
Northern Coalfields Limited (NCL) are the major coal producing companies in
India and CIL is also known as the monopoly miner. It also ranks in the world’s
top 10 firms responsible for billion tonnes of carbon emissions.
Performance of CIL and Subsidiaries in coal production:
|
SUB CO |
COAL PRODUCTION (Figures in Mill Te) |
|||||
|
April, 22 to May, 22 |
April, 21 to March, 22 |
|||||
|
Actual this year |
Actual Same Period last
year |
% Growth |
Actual this year |
Actual Same Period previous
year |
% Growth |
|
|
ECL |
5.9 |
5.8 |
2.6 |
32.4 |
45 |
-27.9 |
|
BCCL |
5.1 |
4.1 |
26 |
30.5 |
24.7 |
23.8 |
|
CCL |
10.5 |
9 |
16.2 |
68.9 |
62.6 |
10 |
|
NCL |
21.8 |
17.8 |
22.5 |
122.4 |
115 |
6.4 |
|
WCL |
9.8 |
7.3 |
35.5 |
57.7 |
50.3 |
14.8 |
|
SECL |
25.1 |
18.5 |
35.4 |
142.5 |
150.6 |
-5.37 |
|
MCL |
29.9 |
21.5 |
38.9 |
168.2 |
148 |
13.6 |
|
NEC |
0 |
0 |
0 |
0 |
0 |
0 |
|
CIL |
108.1 |
84 |
28.8 |
622.6 |
596.2 |
4.4 |
The above table shows the production
of coal for the last financial year and current financial year till date stats.
The data shows that there is no stoppage in production and as stated, CIL also
aims 12% increase in production in the current year. Even though the production
level is on high, the fault-finders blame poor management, planning and
execution.
What do the Ministries have to say?
Union Coal Minister, Pralhad Joshi has
been continuously assuring that there is no coal shortage in the country and as
required by power plants, 11-12 days coal were already stocked. During an
interview, Pralhad Joshi was also questioned on importing of coal by coal
producing companies even if there is no shortage and increase in production.
“Due to upcoming monsoon season, the
possibility of waterlogging in the coal mines will impact the production and
also heavy rains will slower down the transportation. Keeping all this mind,
the import will help to stockpile more coal to avoid the country suffer”. The
same was witnessed last year due to excessive rains. In the last few months due
to the Russia-Ukraine War, most of the power plants that import coal and gas
stopped producing power due to high prices of coal and gas resulting power
outage across various parts of the country. The demand for domestic coal
increased immediately as prices of imported coal increased from US$40 per tonnes
to US$210 per tonnes.
The Ministry of Power had asked the
power plants to import coal at 10% of their requirement and to avoid major
problems in the upcoming months. However, there are other issues such as
availability of funds in form of working capital limits that are faced by the
power generating companies with weak financials. These plants have told the
government that they have no money to import coal as payments from the state-owned
retailers are yet to be received leaving paucity of liquidity. The payment dues
have accumulated so much that it has exhausted the working capital limits that
the opening of the LCs for the imports seems impossible. They are also finding
it difficult to make advance payments for even domestic purchase and railway
transportation. Although, major companies have started importing coal but small
companies have written to the Ministry of Power that they seeking infusion of
liquidity scheme to ease their receivable and payable cycle.
Trade Statistics of Coal
As the demand for coal increased tremendously
since last year and orders from Power Ministry to import coal has resulted in
Increase in imports of Coking Coal and Steam Coal (also known as Thermal Coal
used by Power plants).
|
Total Imports of Coking Coal, Steam Coal
and Other Coal |
||||
|
Sr. No |
|
Values in US$ Million |
||
|
Country |
2020-2021 |
2021-2022 |
2022-2023(Apr) |
|
|
1 |
AUSTRALIA |
5,622.24 |
12,802.74 |
1,637.11 |
|
2 |
INDONESIA |
4,376.84 |
6,427.83 |
1,241.02 |
|
3 |
SOUTH AFRICA |
1,733.70 |
3,169.77 |
438.79 |
|
4 |
U S A |
823.96 |
1,423.65 |
341.2 |
|
5 |
RUSSIA |
422.29 |
1,122.64 |
222.82 |
|
6 |
SINGAPORE |
384.28 |
1,527.40 |
255.77 |
|
7 |
CANADA |
367.47 |
468.17 |
165.34 |
|
8 |
MOZAMBIQUE |
273.19 |
887.26 |
114.69 |
|
9 |
CHINA |
|
387.46 |
1.35 |
|
10 |
SWITZERLAND |
138.20 |
337.04 |
38.75 |
|
11 |
Others |
278.58 |
186.96 |
79.79 |
|
Total |
14,420.75 |
28740.92 |
4536.63 |
|
The above data shows Total Imports of
Coking Coal, Steam Coal and Other Coal to India comparing last 2 years and
current year FY 2022-2023 (till April) from the top 10 countries. The world’s
largest exporters of coal are Australia, Indonesia, South Africa, and USA. The same
has been contributed towards 45%, 22%, 11%, and 5% of imports of Coal in India in
FY 21-22 doubling the figures from the past year. Russia too is the world’s
largest exporter but economic sanctions due to the war has affected its cargoes
flowing and replacing its major supply volumes with Australia, Indonesia, and
South Africa. In the month of January and early February 2022, imports from
Indonesia witnessed a pause due to month-long ban on exports of Steam Coal by
the Indonesian Government saying low stock available amidst skyrocketing prices
of coal, natural gases and oils.
Steel Authority of India (SAIL) along
with other Steel manufacturing companies having huge plants in India import
Coking Coal for improving the quality of the steel produced. While steam coal is
mainly imported by power generating plants, captive power plants, cement
plants, industrial users, and coal traders. As the country faces power outage
problems and pressure from the government, Coal India Limited for the first
time on behalf of Independent Power Plants and State Power Generating Companies
has issued two back-to-back international tenders for importing a total of 6
million tons of coal to build up the stock and to meet the demands in an
ongoing crisis.
So far, in just first two months of
the current year the imports of these highly demand coal has crossed more than
US$ 4 millions. More growth in the imports can be seen in the next few months
as the tenders will be processed and the demand arises. The value of imports
may also look expensive as rising Inflation rates will impact the prices in the
commodity markets. As of now, for the first tender floated by Coal India
Limited, the lowest bidder was Adani Enterprises Ltd quoting for the supply of
2.416 MT on FOR (Freight on Road) basis amounting bid of Rs. 4033 crores.
Followed by Mohit Minerals bid of Rs. 4182 crores and Chettinad Logistics bid
of Rs. 4222 crores.
Initiatives by countries around the
globe
Comparing with Europe, Asia is more
dependent on coal and less on gas for primary consumption of energy. Europe are
steadily lowering down their dependence on coal. Countries like Germany and
Poland have planned to eliminate coal power generation by the year 2030. Poland
being the 96% producer of coal in the EU has also signed The UN Climate Change
Conference in Glasgow (COP26) deal to phase-out coal. While India and China
both defended the use of coal at COP26 conference as they have a massive power
generation and coal fields in the world.
Further to observe, these major steps will eliminate Europe’s role in supply chain of coal business. With most of the countries now relying on renewable energy, the demand for coal has tremendously decreased. Australia, the world’s largest exporter of coal has planned to achieve net-zero emissions by the year 2050. Though India defending the use of coal, few states such as Tamil Nadu, Gujarat, and Rajasthan have greater potential of renewable energy by utilizing huge part of vacant lands for installation of renewable plants with larger capacity. An analyst from Centre for Research on Energy and Clean Air (CREA) also claimed that “there is no coal shortage and production in the country but recent crisis was due to poor management of demand-supply chain and lack of forecasting the crisis during summer-monsoon season where the demand is at the peak”.
References:
https://qz.com/india/2171311/monsoon-season-will-lead-to-more-power-cuts-in-india/
https://timesofindia.indiatimes.com/blogs/voices/power-crisis-indias-options-to-overcoming-crunch/
https://www.bbc.com/news/world-asia-india-61330302
https://coal.gov.in/en/major-statistics/import-and-export
https://cea.nic.in/fuel-reports/?lang=en
https://www.bbc.com/future/article/20211103-india-how-a-just-transition-can-make-coal-history
https://cea.nic.in/wp-content/uploads/2020/04/guidelines_dcr.pdf
https://www.coalindia.in/media/documents/Production_TdRIDan.pdf