Reasons for an electricity shortage in India: Understanding India’s coal imports

Source: The post reasons for an electricity shortage in India has been created, based on the article “Understanding India’s coal imports” published in “The Hindu” on 29th March 2024.

UPSC Syllabus Topic: GS Paper 3-economy-infrastructure (electricity)

News: The article discusses electricity shortages in India due to coal supply issues. It explains that the problem is not coal availability but moving it efficiently to power plants. It also critiques the over-reliance on coal imports and suggests better logistics and regulation to manage coal supplies and costs. Reasons for an electricity shortage in India

What is the status of electricity in India?

In August 2023, there was a shortage of 840 million units of electricity, which was just 0.55% of the demand. This could have been solved with 0.6 million tonnes of domestic coal, but logistical issues prevented this.

The Ministry of Power advised power generators to import up to 6% of their coal. Importing 6% coal could increase the cost of electricity by 4.5% to 7.5%.

According to the report on Annual Rating of Power Distribution Utilities, power purchase costs increased by 15% in FY23 due to increases in demand, coal imports and prices of imported coal.

What are the reasons for an electricity shortage in India?

Logistical Issues with Domestic Coal: The primary cause of shortages is not the lack of coal but the difficulty in transporting it to power plants. For instance, in August 2023, despite having over 30 million tonnes of coal in mines, logistical challenges prevented its efficient distribution.

Overdependence on Imports Misunderstood: The misconception that importing coal is the sole solution adds to the problem. In reality, domestic options like Coal India Ltd.’s auctions provide a cheaper alternative, yet are often overlooked by power plants.

Advisory Misinterpretation: Misinterpretation of the Ministry of Power’s advisory as a mandate for importing 6% coal adds unnecessary cost and doesn’t address the root cause of the shortage, which is a logistics issue within India.

What should be done?

Use Domestic Auctions: Power plants should utilize domestic coal options more effectively. Coal India Ltd. offers coal at lower prices through auctions, reducing reliance on costlier imports.

Tailored Solutions for Different Plants: Recognize that not all power plants face the same issues. Plants near coal mines don’t require imports, whereas those far from mines might need different strategies.

Improve Coal Logistics: Addressing the transportation challenges of domestic coal is crucial.

Question for practice:

Examine the key factors contributing to electricity shortages in India and propose actionable solutions to address these challenges.