Power plants reel under coal shortage; tariffs may shoot up on costly imports

India’s massive fleet of coal-based power plants are running dangerously low on stockpiles, which may force the nation to buy expensive shipments of the fuel or else risk blackouts. 

Stockpiles have fallen to the lowest since November 2017, data from the Central Electricity Authority (CEA) shows. The South Asian nation is not alone in facing a fuel crisis. Buyers from the UK to China are grappling with energy shortages as a rebound in demand outpaces supply. 

As inventories dried up, power plants might be forced to buy expensive imported coal or pay hefty premiums at domestic auctions, said Debasish Mishra, a Mumbai-based partner at Deloitte Touche Tohmatsu. That may raise costs across an economy that is already battling high petroleum fuel prices. 

“A sharp rise in post-pandemic electricity demand is straining fuel supply chains across the globe,” said Mr Mishra. “India has done well to expand its power generation capacity but has failed to give similar attention to coal supply infrastructure.” 

Electricity demand from the State distribution utilities rose by more than 10 per cent in July and 18 per cent in August as economic activity rebounded after a second wave of the pandemic receded and more citizens were vaccinated. 

About 124 gw of power plants, more than 60 per cent of the nation’s coal-generation capacity, had less than a week of inventories as on September 24, according to data from the Power Ministry. Power stations imported 1.9 million tonnes of coal in August, 42 per cent lower than the imports a year earlier, government data shows. 

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