How India’s power crisis is self-made & why we could face another crunch during the monsoon

In 109 of 165 thermal power plants that are currently operational, the actual coal stock is less than 25 per cent of normative stock that they are mandated to keep.

Illustration by ThePrint team

New Delhi: The power crisis in India that made headlines in April might have eased as of now, with not only the mercury coming down a few notches but energy demand also dipping.

But, if a slew of communications from the power ministry to the states are any indication, sectoral experts say the current relief could be short-lived.

The overall power situation in the country remains precarious because of less availability of domestic coal. And, if coal stocks in India’s thermal power plants are not ramped up before the monsoon, there will be a repeat of the crisis that India saw last October and in April 2022.

According to the daily coal stock report released by the Central Electricity Authority (CEA), as of May 22, in 109 of India’s 165 thermal power plants, which are currently operational, the actual coal stock varied between 0 per cent to 24 per cent of the  normative level. The total normative stock that these 165 plants are required to keep is 65,442 thousand tonnes.

For instance, pithead power stations (where a coal mine is located near the thermal power plant) have to keep a minimum of 15 days of coal stock, while power stations located more than 1,000 km away from the coal mine, also called non-pithead stations, have to keep a minimum stock of 30 days.

The 165 operational thermal plants are run by the Centre, state and private power producers.

Senior power ministry officials privately admitted the situation was tight, especially as coal accounts for 70 per cent of India’s power requirement.

“We were able to manage the April crisis but unless states ramp up their coal stock, we will be staring at power shortage again during the monsoon season,” said a senior power ministry official who did not want to be named.

The official added that not only will the irrigation load go up with the paddy cultivation season coming up, domestic and industrial demand will also increase because of the hot and humid weather in June-July. “Besides, production in coal mines decreases during the monsoon season,” the official said.

Push to purchase imported coal, states reluctant  

With domestic supplies unable to match the consumption, the Centre has been pushing states and gencos (power-generating companies) to import coal to run the imported-coal-based plants.

Of the 165 operational thermal power plants, 15 are designed on imported coal. The total installed capacity of these plants is 17,255 MW.

As on May 22, these plants had an actual stock of just 25 per cent of the normative stock of 4118.7 thousand tonnes that they are required to maintain. Imported coal is blended with domestic coal to the extent of 10 per cent to ease the pressure on domestic coal supply.

But there is a catch here. States have been reluctant to import coal because of the high cost, despite several directives from the power ministry since last December.

In its latest missive that the ministry shot off to the state power secretaries on 18 May, it admitted as much.

“In the light of the emergent situation, it is essential that the imported-coal-based plants run and the states import coal for blending as in the previous years. The Ministry of Power has issued directions under Section 11 of the Electricity Act that all the imported-coal-based plants start running and most of them have started running,” the letter, a copy of which is with ThePrint, states. “However, the import of coal by states for blending is not satisfactory.”

Rajasekhar, Fellow (Energy, Natural Resources and Sustainability) at the policy thinktank Centre for Social and Economic Progress, pointed out that “it is a no-brainer that blending expensive imported coal with domestic coal is definitely going to impact the generation cost, and the impact to the retail consumer depends on the quantum of such power purchased by the distribution utilities”.

He added that, firstly, the state regulator has to give consent to purchase expensive power. “Assuming there is regulator’s consent, given the financial condition of the utilities and their current dues to generating companies, the utilities are in a dilemma about handling the issue.”

Rajasekhar further said that while discoms (power distribution companies) do not want their liabilities swelling, they are wary of the trade-offs, i.e., between buying expensive power and creating liabilities, or resorting to optimal load-shedding.

“Generators are already not paid on time, and are wary of purchasing international coal, only to find that discoms won’t offtake (either because by the time it arrives the balance changes, or because they don’t see consumer cash flows commensurate with the higher generation purchases),” he added.

‘Centre arm-twisting states’

With gencos reluctant to import, the power ministry has now decided to act tough. In its 18 May letter to states, the ministry said: “…If the orders for import of coal for blending are not placed by gencos by 31 May and if the imported coal does not start arriving at the power plants by 15 June, all the defaulter gencos would have to import coal for blending purpose to the extent of 15 per cent to meet the shortfall in the remaining period up to 31 October 2022.”

Shailendra Dubey, Chairman of the All India Power Engineers Federation, told ThePrint that the April crisis had happened because of lack of coordination between different stakeholders — power, coal and rail ministries, state governments, discoms, and generation companies.

“We do not seem to have learnt our lesson. The Centre is again arm-twisting states to import coal on the ground that domestic supply will not be enough to meet the requirement,” he said. “But who will bear the high cost of imported coal? The power minister has admitted to states in his letter in May that the rate of imported coal is around $140 per tonne.”

Dubey pointed out that because the coal shortage resulted from “policy lapses” of the Government of India, the power ministry should take up the responsibility to import coal on a government-to-government basis and ensure that the imported coal is made available to state gencos at the prevailing Coal India Limited rates.

“The states should not be penalised. For the policy lapses of the Centre, the financial burden must not be loaded on to states by way of high cost of imported coal,” he added.

Besides, Dubey said, the government should also ensure that enough railway rakes are available to transport the imported coal from ports to thermal power plants.

“Have the logistics been thought of? Just last month, we did not have enough rakes to transport domestic coal from the pitheads to the power plant. Do we have adequate rakes now?” he asked.

High demand, poor fiscal health of discoms led to April crisis

With the Indian economy opening up after the Covid lockdown, and scorching temperatures setting in much earlier this year, the power demand surged. Coal supply from domestic sources failed to meet the required demand, and discoms started resorting to load-shedding.

India’s power demand, which has been on a steady rise, reached an all-time high of 207 GW on 29 April. The peak power shortage was recorded a day earlier. At 10.8 GW, it was the highest since 2012.

Both power ministry officials and experts said the problem had been building up for long. “It’s not just a huge mismatch between demand and supply that triggered a power shortage last October and then again this April. There are multiple factors that led to the crisis. Poor fiscal health of discoms also played a big part in the crisis,” said an official.

At the heart of the power crisis in India is the financial position of the state discoms, which are reeling under mounting losses. India has about 32 power discoms, most of which are state-owned.

The power distribution sector serves as an important link in the entire value chain because revenues originate from the consumers of power at the distribution-end, and fund other players in the chain such as gencos and coal suppliers.

If the consumers do not pay for the power they consume, the revenue stream for the entire value chain gets disrupted, leading to losses for all goods-and-services providers.

States/UTs like Punjab, Delhi, and Tamil Nadu provide free electricity of up to 200-300 units to consumers, leading to local governments paying the discoms for the revenue gap.

According to a report by the Power Finance Corporation, a government undertaking, the state distribution utilities’ losses reduced to Rs 31,672 crore in 2019-20, from Rs 49,103 crore in 2018-19.

Data with the Prayas Energy Group, a Pune-based NGO, shows that subsidies to consumers form up to 30 per cent of the aggregate revenue of the power discoms.

At the beginning of May, the power discoms owed Rs 97,688 crore to the power generation companies, according to the Union government’s Payment Ratification And Analysis in Power procurement for bringing Transparency in Invoicing of generators (PRAAPTI). The maximum amount that power discoms owe to generation companies is in Tamil Nadu and Andhra Pradesh.

The government also needs to address the huge aggregate technical & commercial losses of discoms. “System losses need to be controlled through technical as well as administrative reforms,” said a senior CEA official.

(Edited by Nida Fatima Siddiqui)