If you are living in India and currently reading this (1st week of May 21), you might have been experiencing severe heat by now. Adding to this are the regular power cuts.

This will be an interesting read, especially for those who are interested in the Indian Power sector.

In this blog, we uncover everything about why there are powercuts happening in your homes to railways being dedicated to coal transport.

First things first. India has about 62 DISCOMs (Distribution companies) which are responsible for supplying power to their allocated regions, dominantly run by the states. DISCOMs for a long period have been under tremendous pressure due to inefficient operations and pending dues. In fact, the centre has allocated about INR 1 lac crore to clear their dues and improve the infra efficiency.

That being said, it isn’t easy to operate a DISCOM in India owing to political issues, pending payments from the customers, power theft and most importantly supply-demand dynamics.

India, the country as a whole, experiences higher temperatures in the months of March, April and May. This in turn makes most people turn on their ACs/ coolers (AC is still seen as a luxury here) to be safe from the heat. This wasn’t a problem in 2020 or 2021 as most of the country was in lockdown during the same period. This time it isn’t because offices and industries are running at full speed to achieve what was lost, thus spiking a sudden demand of 12.1% as compared to Apr’21. India recorded its peak demand at 207.11 GW on Apr 29, which was the highest ever recorded in a day.

Adding salt to injury is the ongoing heatwave, the primary reason being climate change due to human activities, causing a lot more spike in power demand. This heatwave is the highest ever India is facing, notching up to 50C surface temperatures.

So, in order to serve such a spike in power demand, having the below in place usually helps:

• Forecast methods which could predict such scenarios
• Infra that can serve such huge spikes in load
• Having the right amount of supply in place

Usual forecast methods like linearisation cannot accommodate the abrupt demand changes that happened due to lockdown and back to work.

Infra is something that some of the DISCOMs have been working on all day long. But huge structures like these need huge capital investment and time, a process which needs patience

The power generation in India is coal-dominant, especially in the summers when the hydropower is low due to low water availability. In fact, coal dominates with about 75% of the total electricity supply in India. This is also one of the reasons why India needs to shift to renewables in order to reduce its carbon footprint. Not as easy as we write because the power demand itself has been rising owing to infrastructure development across the country.

So, if coal is available in sufficient quantity there shouldn’t be power issues at least, right? That is where the majority of the problem is.

There were reports across the media in the 2nd and 3rd week of April 2022 that there is a huge coal shortage at many thermal plants. Nomura, in their recent research report, noted that the current stock is much lower than the “average of 17 days held over the last 5 years”. The coal stock is deemed to be critical if the stock is less than 25% of the normal stock levels.

As per CEA, the stock of coal in 108 of the 165 coal-fuelled power plants is at critical levels and can run the power stations at 85% of the total capacity for less than seven days (as reported by Mint on May 2, 2022).

What caused this coal shortage?

As of 1 April 2020, the total geological reserves of coal in India stood at a little over 344 billion tonnes. Coal India Limited, a government-owned coal mining and refining corporation, contributed to about 80% of the coal produced in India. As the annual report of Coal India for 2020–21 points out: “At the current rate of production, the reserves are adequate to meet the demand for multiple centuries to follow.”

If that’s the case, why is there a shortage?

Many industries depend on coal, not just the power sector, like steel, cement, chemicals and metals. Their demand is not just met through the coal produced in India but also from imports. The coal imports which stood at 6.9% of the total coal consumed in 200–01 now stand at 21.7%. In fact, there is a dip from 2014–15 which peaked at 26.1%. This is because of the high import cost.

The import cost of coal nearly tripled over the past 1 year owing to the Russia-Ukraine war, making power plants and industries depend on the coal produced in India.

However, there are reports that the supply of coal to power plants is put on a priority mode by the government. This means giving them a priority in railway tracks (the most used transport in India) and less productivity for industries.

Also, a few cities have been experiencing summer shovers, which in fact is reducing the power demand to a small extent. That doesn’t mean the problem is completely solved as India keeps improving economically.

The next few months will be critical in how the power supply shapes up in India.