The worst fears have come true about problems in coal availability developing into a full-blown energy crisis. Like most parts of the country sizzle in heatwave conditions, there is an unprecedented drawdown on available power, leaving gaping gaps in supply. Some states are going through power cuts of up to 8 hours and the coal situation with the majority of power plants is precarious. The Delhi power minister raised an alarm that the capital power plants are left with only one day’s requirement of coal. The government has mounted a crash program to replenish supplies and the railways have cancelled over 750 train trips to facilitate coal movement. But with supplies leaving a big gap in terms of requirements, the crisis is all set to continue. Inventories with the power plants at the beginning of this year were just enough for nine days, as opposed to a federally-recommended 24 days. This was stated to be the lowest since 2014 and instead of registering an improvement, the situation has progressively deteriorated, thanks to both domestic as well as international developments. Last year’s excessive rainfall, particularly in the states of coal-producing states such as Jharkhand, Odisha, West Bengal, Bihar, Chhattisgarh, Telangana, and Madhya Pradesh, hit production significantly, leading to lower supplies from Coal India, which provides the bulk of the power plant requirements.
India is among the victims of Putin’s weaponisation of energy, although not to the extent that some of the other countries, particularly European, have been subjected to. The weaponisation has altered the basic structure of the global energy complex, with the existing order in terms of prices, transactions, demand-supply as well as energy geopolitics having undergone radical shifts. The Russian invasion of Ukraine has upset all calculations relating to energy, whether oil, gas, or coal. There are at least 12 power plants in India that run exclusively on imported coal and all of these are starved of the coal to power their generators, which is also contributing to the current power crisis. India is not enforcing the west-called sanctions against Russia, but that is no consolation as international coal prices are at their historical highs. The European and western embargo against Russia has meant placing a premium on coal from other sources. India imports its coal mostly from Indonesia, Australia, and South Africa, but with European consumers scouting around for new sources, the demand-supply equations have changed, putting further pressure on prices. Indian coal imports have come down drastically ever since the price realisation for the commodity has spiked.
The EU ban comes at a time when the international coal market is already very tight. This has been accompanied by a surge in coal demand in Asia, as countries try to minimise imports of expensive natural gas, sending prices soaring further. New benchmark trades have occurred at more than USD 400 a tonne, as against a mere USD 70 per tonne that prevailed one year ago. Western nations are hoping that Russia’s overdependence on fossil fuel revenues will hold Putin back from some of his desperate actions, including a planned insistence on rouble payments for gas supplies. Both sides are looking for workarounds so that supplies could be maintained without either side needing to make compromises on their respective political positions.