Coal shortage threatens to trip grid, SC adds to it
In power terms, it is the perfect storm. At a time when the Supreme Court has declared all coal blocks allotted since 1993 as illegal, and a decision on what to do with them is to be taken on Monday, the country’s electricity grids are precariously poised due to an acute shortage of coal, primarily from the main supplier Coal India Limited. So, unless something is done to immediately augment capacity, or to reduce demand, we could well have a situation like in July 2012 when the entire grid collapsed. As FE reported on Friday, both the northern and western regional load despatch centres have been sending out warnings to states asking them to draw less power. While a little over 14,000 MW of thermal capacity has been shut down due to lack of coal or technical glitches or payments not coming from cash-strapped SEBs, another 41,000 MW is in a super-critical phase, with under 3 days of coal stocks; around half the country’s thermal plants have under a week’s supply of coal. The severity of the situation differs from one state to another—Uttar Pradesh is facing a shortage equal to 70% of its peak demand—and has been aggravated by more demand from irrigation pumpsets due to a poor monsoon.
While power minister Piyush Goyal is right in blaming the UPA’s policies of not allowing mining capacity to be increased due to decisions like go/no-go and delaying of environment clearances, his immediate task is to deal with the problem at hand. While easing of environment clearances has taken place, and things are moving on getting critical railway lines built to clear coal from the pitheads, this is not going to bear fruit for a few years at least. Goyal would do well, in the interim, to get Coal India to import more coal and GAIL to import more gas. This means the government needs to, at the earliest, take a call on pooling coal prices as well as on pooling gas prices—an early decision on hiking prices of domestic natural gas, put on hold by the government for over 3 months now, will also have to be taken. Given that states that benefit from lower-priced coal from Coal India and gas under the APM will be loathe to pay a higher price, this means a process of negotiating with them, perhaps in return for cheaper power from the Centre’s quota. While the impact of this policy will be felt only after 4-5 years, the government just has to move on opening up the coal sector to commercial miners, including from overseas. That is how India’s oil/gas production has risen, and it is the only way coal production will rise.