Coal Crisis: Is India on the Verge of Electricity Shortage?

Vrinda Gupta
Vrinda Gupta

A Wake-Up Call for India?

Coal is used to produce almost 70% of electricity in India. With coal supply declining, spot electricity rates have surged. Right now, India is facing two major challenges which are:

  1. Increased Demand for Electricity: As post-pandemic recovery began in India, industrial activity restarted. As a result, demand for electricity shot up.
  2. Shortage of Coal Supplies: Due to heavy rains, coal mines were flooded. It resulted in a decreased domestic output of coal. Since the coal prices are at an all-time high, it is becoming increasingly difficult to import coal to fulfill domestic shortages.

Dr. Aurodeep Nandi who is an Indian Economist and Vice President at Nomura( A financial services company) talked about the impact importing coal could have on the economy. He said, “If I am [as a company] importing expensive coal, I will raise my prices, right? Businesses at the end of the day pass on these costs to consumers, so there is an inflationary impact – both direct and indirect that could potentially come from this

How did we land up in this situation?

This coal crisis has been budding for a few months by now. After the fatal second wave of Covid-19 which hit India drastically, the demand for power rose sharply. Due to the picking up of India’s economy, power consumption set off. In just the last two months alone, the power consumption jumped by almost 17%, compared to the same period in 2019. Simultaneously, prices increased by 40% globally.  As a result, India’s imports fell to a two-year low.

For those of you who don’t know, India is the world’s second-largest importer of coal. In spite of the fact that it holds the fourth largest coal reserves in the world. Therefore, power plants that are usually dependent on imports are also relying on Indian coal. It adds more strain as Indian coal is already stretching in domestic supply.

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In Conclusion

According to a Bloomberg News survey, the Indian economy is expected to expand 9.4% in the year through March 2022.  It would be the fastest pace among major global economies in the world. As India embarks on a high renewable energy future, the uncertainty grows and planning will become even more complex. However, for now, the government should take action to replenish the depleted stockpiles of coals. It might take some time before its completed.  On the consumer part, we can take voluntary steps to curb the electricity deficit. For example, the ‘9 minutes lights out’ in April helped a lot. Similarly, we should become more conscious of our environment and choices regarding the same.



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