Dear Reader, 

The 20th edition of the Spotlight brings to you an account of the recent power crisis in India. In this edition, we highlight the concerns, both evident and hidden, that have led to long duration of power cuts across the country. The focus is also on remedial measures adopted by the Government and the possibility of reoccurrence of crisis like scenario in absence of long term demand forecasting.

We look forward to hearing your comments and suggestions!

India’s Power Crisis 2022

As of March 2022, India’s installed capacity stood at approx. 400 GW. Running this capacity at full would mean 400 GW of continuous power supply. Yet, when the demand reached a fraction more than half of the total installed capacity, 207 GW, the demand-supply chain was disrupted at the end of April this year. And ever since the early arrival of summer, citizens of the country face unprecedented power cuts not seen in a decade.

In 2012, a grid failure had rendered most of India's northern, northwestern, eastern and north-eastern states powerless, affecting over 400 million people. Being a technical failure, the situation was restored to normalcy in 2-3 days. An almost power crisis in October 2021 was mainly due to a shortage in coal stocks – half of the thermal plants in India had coal stocks 25 percent below the normal level. But a full-blown crisis was averted by pumping up more coal in thermal power plants.

This time, however, the solution to the ongoing power crisis is not straightforward and depends on multiple factors:

  • Rise in the prices of imported coal – Imported coal increased over 200 percent to US$203 per tonne against US$60 per tonne in March 2021. This has affected 17,600 MW of thermal plants which are currently running at low capacity producing only 10,000 MW of power. The increased cost of power generation does not fit well with either generator or distribution company (DISCOM) without passing it on the increased cost to consumer which is a big and precarious political agenda
  • Domestic coal shortage – Data from Coal India for May 08, 2022 shows that coal availability is just 32 percent of normative stock (26 days stock) at all India level – availability of 21.2 million tonnes against the requirement of 66.5 million tonnes. Of the total 173 thermal power plants with combined capacity of 203 GW, 99 plants are operating at critical stock levels (<25 percent of normative stock) while 08 plants are completely idle. This shortage issue has been alternatively attributed to mining and transportation with no single cause to address. Coal India however, has claimed increase in production by 29 percent with 68.58 million tonnes in April 2022 against 51.62 million tonnes in April. Coal dispatch to power utilities grew 18.15 percent to 61.81 million tonnes in April 2022 as compared to 52.32 million tonnes in April 2020.
  • The unexpected demand rise – The peak power demand in India from 2019-2022 for April was 177 GW, 133 GW, 183GW and 207 GW. The dip in demand for 2020 was mainly due to decreased demand from the COVID-induced pandemic, which even relayed to 2021. However, this year, the sudden surge in demand was not expected this early April. For instance, in July, the peak power demands of 200.54 for 2021. The underlying reason for this early demand surge is probably higher economic activities as the country fully recovers from the pandemic and extreme temperature on account of climate change.
  • The long chain of dues – Every entity in the power demand-supply chain is either owed or due to a heavy sum of money to another entity. DISCOMs generally do not generate revenues to the tune of power supply because of power losses, poor collection efficiency, subsidies etc. Subsequently, they fail to pay their dues to power generators, which do not pay to coal companies. The circle is vicious and keeps getting bigger. States, too, delay the subsidies promised to DISCOMs. Being central and most state-run, these organisations are bound to carry out businesses with each other despite incurring heavy losses. Thus, creating a mechanism in which every player is trying to minimise its losses by supplying and buying a minimum required quantity of power or coal.

These five states account for 61.45 percent of total DISCOM dues of INR1.05 trillion. Similarly, power generators’ dues towards Coal India are another financial setback that aggravates the ongoing power crunch.

  • Urgent solutions – So far, several interventions to de-escalate the power situation have been taken up:
    • State providing financial aid to DISCOMs to liquidate dues towards generators
    • Government owned banks providing working capital loans to financially distressed power generators
    • Domestic coal based power plants to import coal for blending purposes to compensate for the coal shortage
    • Invoking Section 11 of the Electricity Act, the government can dictate a power generating company to operate and maintain any station by its directions. This move is expected to bring 7 GW of imported coal-based plants into operation
    • Around 1,100 train trips will be cancelled till May 24, 2022, to facilitate coal transportation
    • Preference to pit-head plants for coal allocation for reducing transportation time
    • Additional cost for imported coal to be adjusted in December 2022. This will provide a financial cushion to DISCOMS for buying costly power
    • Emphasis on ramping up coal mining. However, coal officials deny of any production shortage and link the crisis to logistics issues
Thermal power plants are the baseload of the Indian power sector. Although it accounts for only 59 percent of total installed capacity, almost 78 percent of total electricity demand is met through these plants

Climate change concerns have overshadowed the importance of coal in India’s total energy requirement, and pressure is on the government to quickly ramp up renewables and phase down coal. The above figure suggests that even if renewables coupled with storage become at par with thermal installation, there is a long way before it can surpass thermal in generation aspects. Going forward, phasing out coal would mean stressed nature dependent renewable assets. And the more climate irregularities, the more the possibility of safety threats to these assets.

For years to come, coal will remain the breadbasket for our energy requirements. Due to faster economic growth and global warming, the demand growth pattern will escalate. The emergency measures adopted to avert the ongoing crisis may work as a short term solution. A similar situation may arise every year in the absence of an accountable robust long-term demand forecasting mechanism that incorporates variables such as price variations in coal, coal linkages, back-up power generation capacity, integration of renewables, transmission strengthening, etc. The Central/ State Electricity Regulatory Commission may even set up separate units in each state for medium to long term demand forecasting rather than leaving it as a general exercise in inefficient DISCOMS.