India is set to face more power cuts this year as utility coal stocks are at their lowest in at least nine years and power demand is expected to grow at the fastest rate in at least 38 years, according to officials and analysts.
Power cuts could stifle industrial activity in Asia’s third-largest economy, just as economic activity began to recover after months of COVID-related lockdowns.
The power shortage as a percentage of demand soared to 1.4% over the past week, a Reuters analysis of government data showed, higher than the 1% shortfall in October, when India faced for the last time to a severe shortage of coal, and the 0.5% deficit in March.
The southern state of Andhra Pradesh, home to factories operated by automakers such as Kia Motors and drug makers including Pfizer, faces an 8.7% power deficit, the data shows, pushing it to resort to widespread power outages.
Coal inventory at power plants had an average stockpile of nine days at the start of this fiscal year from April 1, the lowest since at least 2014. Federal guidelines recommend power plants have at least 24 days of inventory on average.
“The problem is that even after Coal India and the Coal Ministry continued to ask power plants to stock up, utilities continued to reduce their inventories,” said Indian Chief Executive Rajiv Agarwal. Captive Power Producers Association.
Facor Alloys Ltd, a producer of ferrochrome used in the manufacture of stainless steel, said on Monday it was cutting production by 50% due to power cuts in Andhra Pradesh.
Industrial states such as Gujarat and Maharashtra resorted to load shedding, officials said, with government data showing eastern states such as Jharkhand and Bihar, and Haryana and Uttarakhand in the north reporting power shortages of more than 3% each.
“A proportional increase in power generation to meet increased demand is unlikely, limited by the availability of coal,” Fitch Ratings said in a note Thursday.
Coal accounts for nearly 75% of India’s electricity generation.
A shortage of trains to deliver coal to power plants is also exacerbating the supply crisis. The number of trains engaged by Indian Railways per day is 415, 8.4% less than the 453 required by the utilities.
The actual number of trains available from April 1-6 was 379 a day, 16% fewer than needed, according to the minutes of a meeting held last week between the electricity and coal ministries reviewed by Reuters.
ELECTRICITY DEMAND IN FULL Boom
India’s electricity demand is expected to soar in the summer, with meteorological officials predicting above-normal maximum temperatures in April in many northern and central regions.
“Unprecedented climate change has led to an increase in demand after midnight due to the increasing use of air conditioning,” said Harry Dhaul, chief executive of the Independent Power Producers Association of India.
Total power generation is expected to rise 15.2% in the year to March 2023, according to a Federal Energy Ministry memo reviewed by Reuters, with demand expected to grow at the fastest pace since under 38 years old.
This will likely increase coal-fired power generation by 17.6%, according to the memo.
Rising electricity demand this year has already forced India to cut coal supply to the non-power sector, despite record production and supply from Coal India Ltd, which produces more than 80% of the coal Indian.
Coal India is targeting a 4.6% increase in utility supply to 565 million tonnes this financial year to avoid a shortage, another memo from the Energy Ministry showed.
But forecasts of electricity demand growth prompted the Department of Energy to ask utilities to increase imports of coal for blending to 36 million tonnes, the highest in at least six years.
The move could add to the financial difficulties of indebted electricity distributors, as global coal prices are trading at high prices compared to average levels in 2021 due to the Russia-Ukraine crisis.
“High international coal prices would limit any significant increase in coal imports,” Fitch Ratings said, adding that domestic supplies could be hit during the annual monsoon season.
(Reporting by Sudarshan Varadhan; Additional reporting by Rajendra Jadhav in MUMBAI and Nallur Sethuraman in BENGALURU; Editing by David Evans)
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)