India has rolled out an emergency law ordering states to immediately import coal stocks. The move looks to counter input shortages at the thermal plants.
With energy demand increasing by almost 20% this summer, domestic coal miners have struggled to supply local power plants, which produce around 75% of all electricity in the country, according to the Power Ministry.
India's Minister of Power R.K. Singh reviewed the power and coal situation with officials on Friday, asking states and energy companies to place coal import orders for at least 10% of their blending coal stocks. The move looks to supply additional coal to the power plants during May.
Tamil Nadu and Maharashtra states have responded to this call, while Punjab and Gujarat are currently closing import deals. For their part, Rajasthan and Madhya Pradesh are in the process of issuing tenders.
Sources in Ministry of Power told Sputnik that states have been asked to seek coal from foreign suppliers and inform the federal government so as to ensure the speediest possible import.
The operation also looks to restart activities at all the power plants that had previously halted operations due to financial stress or high international coal prices. Forty-three percent of India’s coal-fired power plants are currently sitting idle, removing 17.6 gigawatts of production capacity from the national grid.
Likewise, ministry data indicates that 70 of the country’s 165 power plants are running on critical coal levels, and stocks are “declining at a worrisome rate”. The Central Electricity Authority has affirmed that on 4 May, national stocks stood at 21.5 million metric tonne: enough for less than eight days.
The government has also set up a committee to look into ways to minimise the financial burden of higher import bills due to the rise in coal prices. Authorities have indicated that states may increase consumers’ per-unit cost of electricity.
"The international price of coal has gone up in an unprecedented fashion. It is currently around $140 per tonne," a ministry statement read.
However, importers have limited options given that one of India’s major coal suppliers, Indonesia, is currently struggling to meet its own domestic demand.
According to Indonesia’s official data, the average price for Indonesian thermal coal paid by Indian buyers last year was $49.02 per tonne. Currently, prices exceed $200 per tonne, making it unviable for the Indian energy market.
Sources have indicated that Indian buyers might now look to Mongolia, Russia, and Australia for the additional coal needed. Russia has enormous coal stocks available as European countries curtail imports over the Ukrainian crisis. The EU imported almost 70% of its thermal coal from Russia before the Ukraine crisis.
Indian states may order 21.8 million metric tonne of coal, while power plants owned by private firms are expected to import 15.9 million metric tonne to meet the shortages this summer.