A Short Note On Shortage of Coal

India’s natural reserves of coal are one of the highest in the world. The Eastern and Southern parts of the country have the largest deposits of hard coal; Tamil Nadu accounts for 80% of the Lignite reserves.

Coal mining in India dates back to 1774- the mining activities started in the Raniganj Coalfield along the western banks of river Damodar. The demand for coal was initially fuelled by the advent of steam locomotives, World War I, and the Industrial Revolution in the country.

In 1920, the Coal production in India was 18 million metric tons, compared to 79.54 million tonnes production as of February 2022. Today India is the second-largest producer and the second-largest consumer of coal worldwide. 

Coal Consumption in India

India is the second-largest consumer of coal in the world, next to China. The International Energy Agency (IEA) has projected India’s coal consumption to increase at a rate of 3.96% annually. 

In India, the majority of the coal consumption is attributed to the Thermal Power Sector. The various industries and their proportionate coal consumption are mentioned below. 

• Thermal Power Industry – 64.07%
• Steel and Washery Industry – 6.65%
• Sponge Iron Industry – 1.06%
• Cement Industry – 0.75%
• Chemical and Fertiliser Industry – 0.19%

The demand for coal is expected to increase in the coming years. But as the upward trend continues, is India reeling under a severe coal shortage crisis? Let us study the reasons that led to this shortage of coal to understand the dynamics of the Indian Coal Industry.

Coal Shortage 

Is there a shortage of coal in India? Let us look at the reserves of coal in the Thermal Power Plants. As per data of November 2021, out of the 135 coal-powered plants in India, 80% of the plants had only 8 days of coal supply left. More than half of them had only 2 days of supply left. For the past four years, the average availability of coal reserves in power plants was around 18 days. 

This data implies that India is indeed reeling under an acute coal shortage. Many states, including Punjab, Rajasthan, Maharashtra, Andhra Pradesh, and Delhi, faced the heat of coal shortage in the form of power cuts. These states face severe power cuts spanning several hours a day. 

Reasons for The Coal Shortage

Let us analyse the various reasons that contributed to this shortage. The major reasons cited by the industry experts are:

1. A surge in demand for power
2. International coal price rise
3. Excessive rainfall and inadequate stockpile

Let us learn about how each factor contributed to the shortage.

A Surge in Demand for Power

India is one of the largest developing countries in terms of its manufacturing sector. Due to this development, the energy demand is spiralling upward. The Government of India is also providing more and more households with access to electricity and a clean form of cooking fuel. In addition, as mentioned above, the Thermal Power Industry consumes the majority of coal.

The pandemic and the following lock-down did lead to a decline in demand for power in the first quarter of 2020. The power demand in India was on a declining trend for the first time in three decades. However, post pandemic, with the easing of restrictions and recovery of the economy India saw an increase of 13.2% in power demand during the first 8 months of 2021. India’s demand for electricity reached an all-time high of 200.57 GW in July 2021. The sudden upsurge in the power demand is one of the leading factors contributing to the coal shortage.

International Price Rise

India has the world’s fourth-largest coal reserve. Besides being one of the world’s largest producers of coal, India is also the third-largest importer of coal. This is because the Thermal Power Industry consumes most of the domestically produced coal. The non-power industries majorly depend on coal imports for their operations. 

India is pumping up its domestic coal production. But the increased production meets the increased demand of the Thermal Power Industry. The non-power sector, which depends majorly on coal imports, feels the heat of the international price rise.

Let us have a glance at India’s coal import statistics. India imports coal from the below-mentioned countries.

• Indonesia – 46%
• Australia – 23%
• South Africa – 14%
• The USA – 6%
• Others – 11%

The International coal prices have hit a record high of $400 per tonne. The ongoing conflict between Russia and Ukraine, as well as the low coal supply from Russia, impact the global market’s sentiments. The external factors add to the pressure on the coal price. Incidentally, the crude oil and natural gas prices are also at a record high. 

India’s major coal imports are from Indonesia (43%) and Australia (26%). The Pandemic had hit coal production in Australia, and the unseasonal rains in Indonesia also impacted the production of the latter country. In addition to this, China’s increasing power demand also led to a global price hike. 

This price hike led to India reducing its coal imports, which has increased the burden on domestic coal production in India. 

Excessive rainfall and inadequate stockpile

In July-August 2021, heavy rains lashed the coal mining regions for more than a week. The average daily coal output fell from 1.90 lakh tonnes to 90,000 tonnes which is more than a 50% reduction. Some logistical issues also cropped up due to the heavy rainfall.

The power generating companies failed to stock up on coal before the monsoon months. According to the CEA guidelines (Central Electricity Authority), the power plants should maintain 14 days of stock. So while the economy was starting to gear up with the slow removal of lock-down, a failure to stock up on coal led to an imbalance. 

Conclusion

The shortage of coal in India was mainly due to an increase in demand for power, mismanagement of resources, and the increase in the global price. Despite having an adequate quantity of coal and adequate mining capacity, the country has faced an acute coal shortage. The stockpiling of coal in power plants and logistical issues have to be better managed. 

The thermal power industry uses up almost 64% of coal. We should also look at various other renewable energy sources, such as solar power and wind power. We should reduce the dependence of the power industry on coal. Alternate renewable sources of energy should be encouraged.