Indian states stare at power shortage amid coal supply crisis at power plants

Several states in India are likely to see a power shortage in the coming weeks as power plants struggle to find optimum amounts of thermal coal amid rising summer demand, higher import costs and the resultant supply tightness, sources told S&P Global Commodity Insights in the week that began April 10.

Global thermal coal prices have remained elevated as a fallout of the Russia-Ukraine conflict, which disrupted trade flows and crippled supply amid additional demand from Europe, which has now sanctioned Russian coal. As a result, imported coal has largely remained out of bounds for price-sensitive markets like India.

Market sources said India may need to import coal even at the current higher prices. "While the prices are too high, imports can still be done to meet the summer demand on a temporary basis to stabilize the situation and avoid outages," an India-based source said.

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According to the latest data by India's national load despatch centre, the country's power plants recorded an electricity supply shortage of 63.19 million units on April 10, much higher than the average daily supply shortage of 16.01 million units in the entire fiscal year 2021-22 (April-March).

The shortage level was even higher at 80.08 million units on April 7, which raised concerns among several market participants, who said the crunch was near to mid-October 2021 levels when India faced an acute power crisis as the stockpile at 115 power plants slipped to critical levels.

Coal stocks at the country's utilities had dipped to 7.2 million mt on Oct. 8, 2021, sufficient only for four days' worth of coal burn, due to disruptions in supply caused by heavy rains and lesser power generated by imported coal-based utilities. As on April 10, as many as 95 power plants were running on critical coal stocks, including 11 imported coal-based electricity generating stations.

Electricity shortage looms

Sources said Indian states including Andhra Pradesh in the south, Maharashtra in the west and Madhya Pradesh in the center are already recording a gradual rise in power shortage and the situation could aggravate further.

"Andhra Pradesh daily demand has jumped to 220 MU [million units] and 12,000 MW [during peak demand hours] against the expectation of 200 MU," said Mohit Kumar, senior vice president at DAM Capital Advisors Ltd.

"The state has tied up with around 17,000 MW of generation capacity, but around 2,500 MW of that capacity are not functioning because of high gas prices and disputes related to power purchase agreements. Another 7,800 MW are renewable energy-based capacities which are not completely available during peak demand hours, so effectively 8,000 MW-10,000 MW capacity is left to meet the demand of the state," Kumar said.

According to a notice issued by the Maharashtra State Electricity Distribution Company Ltd. on March 31, reviewed by S&P Global, the state has decided to temporarily curtail electricity supply to segments of agricultural power consumers in the state. Other provinces where high supply shortages were recorded on April 10 include Madhya Pradesh (9.67 MU), the union territories of Jammu and Kashmir and Ladakh (cumulatively 4.65 MU), Punjab (4.5 MU), Haryana (4.39 MU) and Jharkhand (2.29 MU).

Stockpile woes raise alarm

According to the latest data by the Central Electricity Authority, or CEA, for April 7, coal-based power plants with a cumulative capacity of 7,295 MW across India were undergoing outages due to fuel shortage.

Stockpiles at Indian power plants have been gradually coming down since March 31 and were at 23.63 million mt on April 10, sufficient for less than nine days of coal burn, according to the CEA data. The stocks were over 25 million mt since Feb. 1, but higher power consumption with the advent of the summer months has led to steady stock depletion since the beginning of April.

S&P Global reported April 1 that India needs to increase thermal coal imports to meet rising power demand during the peak summers, even as import prices remain elevated due to supply tightness created by the Russia-Ukraine conflict. India's state-run Coal India said March 28 that its pithead stock is expected to rise above 60 million mt by April 1, 39.39% lower than the corresponding period in the previous year. Coal stocks at Indian power plants stood at 25.5 million mt March 28, 12.96% lower on the year.