Coal India, the fall guy for power crisis

Synopsis: Instead of blaming Coal India, there is a need to recognize its efforts to meet the demand for coal, and its help in generating power at affordable tariffs.

Introduction

The post-Covid economic recovery has led to a major increase in the demand for power, both in India and globally. India’s coal-based power plants are struggling with a shortage of coal stocks to meet the end demands.

What are the reasons behind it?

The reason behind this shortage is both structural and operational.

Structural Changes

Allocation to private sources: The government appointed the committee in the early 1990s. It concluded that Coal India Limited (CIL) is not sufficient enough to meet the need of excess demands in case if needs arise in the future. So, the government amended Coal Mines Nationalisation Act (CMNA) in 1993.

Under this, it allocates 200 coal blocks of 28 bn tons from CIL and allocates them to end-users (mostly private) for the captive mining of coal. But unfortunately, they failed to produce any significant quantity of coal to meet the rapidly rising power capacity between 2007 and 2016

Production: There is the requirement that coal production should produce at least 500mn tons per annum (mtpa). But, in reality, it never proceeds 60 mtpa.

Operational Changes

Mandatory Requirements: Central Electricity Authority mandates a coal reserve of 15-30 days, which was lacking.

Non-Payment: The non-payment of dues by the power companies of the coal companies has led to poor finances of these companies. According to the reports, 18000 crore is due on power companies.

Shortage: The continued shortage of domestic coal production has forced India to import about 200 mn tonnes of coal. China’s increased consumption, driving international coal prices upwards, this has led to reduced coal imports in India.

Internal problem: Many of the staff members got infected or lost their lives with covid. This has led to a shortage of employees.

Geographical Impact: Monsoon also added disruptions in the mining process.

What is the performance of CIL?

Though CIL has increased its output by 5.8% in the 1^st half of 2021-22, the consumption also increased.

With monsoon receding, CIL has started ramping up production and supply will soon meet the demand. It has already increased its coal offtake to more than 1.5MT per day. Apart from this, CIL has also been able to replace imported coal with domestic coal. The cost of CIL coal is still cheaper than imported coal despite various taxes and transport costs.

What should India do?

CIL has performed excellently despite policy measures in the 90s which took away 28 billion tonnes of coal. So, instead of blaming, CIL needs to be appreciated for its performance and for providing light to the people.

Source: This post is based on the article “Coal India, the fall guy for power crisis” published in Indian Express on 18^h October 2021.