By Kashish Shah
In a knee-jerk reaction to the ongoing power shortage crisis, the ministry of environment, forest and climate change has eased environmental norms for coal mining. In a circular dated May 7, 2022, the ministry has granted some coal mines an exemption from environmental clearance and public consultation for an expansion by a further 10% of their existing capacity.
This is a further relaxation of an earlier exemption that granted expansion of up to 40%. The move from the ministry has been billed as a special dispensation to counter the coal shortage to meet the ongoing steep rise in power demand.
India’s electricity demand jumped 15% in April 2022 compared to the same month in 2021. A bounce-back in demand after the two-year Covid slump, coupled with the early onset of summer exacerbated by record-breaking heatwaves across northern India, is the major contributing factor to the sharp rise in power requirement.
During the last week of April, India’s daily peak demand touched highs of 200 gigawatts (GW) and faced peak demand deficits of 8-10GW. On April 29, 2022, India’s daily peak electricity demand rose to a record high of 207 GW. The northern region faced an acute deficit of 10% in meeting the peak demand on that day. The supply-demand mismatch has caused brownouts all across India. A recent BBC report refers to a survey from a polling agency, LocalCircles, which found one out of three households from 322 districts reported power outages of two hours or more each day in April.
The current crisis has more to do with the shortage of coal stockpiles at coal-based power plants and coal transportation logistics than volumes of coal mined.
India’s domestic coal production grew by 8.5% to 777 million tonnes (mt) in FY22 from 716 mt in FY21. Coal production in April 2022 was 29% higher compared to the same month last year, but the coal dispatch volumes only increased by 9%. Even then, plants have failed to maintain the necessary coal stockpiles.
The Central Electricity Authority’s report on coal stock at coal-based power plants on April 1, 2022, shows that 155 non-pithead plants (for which coal needs to be hauled via the Railways from distant mines) had aggregate stocks of only 31% of the normative level required. The situation worsened at the beginning of May when 147 of the non-pithead plants had an aggregate stock of only 26% of normative stock requirements—83 plants based on domestic coal and 11 plants based on imported coal had stock at critical levels of below 25%. In October 2021, a similar power crisis had emerged, during which the power ministry had directed all plants to maintain adequate coal stockpiles in advance.
Russia’s war in Ukraine is having an intense inflationary impact on coal prices. The Indonesian coal price has almost doubled to $89.6/tonne (t) in May 2022 from $54/t during the same time last year.
Plants designed to operate on imported low-ash coal are suffering due to the record high prices of imported coal. Extremely low utilisation of a total of 17GW of such plants has been another obstacle to meeting the high demand.
To counter the power shortage crisis, the Railways is using 86% of its open wagons to transport coal to plants. This is somewhat reflective of the fact that the availability of coal is not an issue.
A large proportion of India’s coal mining resources is concentrated in the central and eastern states of Madhya Pradesh, Chhattisgarh, Jharkhand, West Bengal and Odisha. India’s coal-fired power sector is increasingly facing the challenge of hauling coal from mines in these locations to plants across the country over distances up to 1,500 km.
To reduce the pressure on the Railways, some of the coal linkages between mines and plants have been rationalised over the past few years to optimise coal delivery. However, the Railways continues to face the pressure of managing passenger freights versus coal freights, both of which run on the same lines.
Exempting coal-mine expansions from proper environmental and social impact assessment is not a long-term solution for power-supply security. In fact, it could have severe social and economic impacts on indigenous communities living near the coal mines as well as the flora and fauna surrounding the mines. The cons of the policy move potentially outweigh the short-term pros.The current crisis presents an opportunity to accelerate the commissioning of clean energy capacity. Policies to increase the uptake of distributed and rooftop solar PV, which could be built faster without putting pressure on transmission networks, will provide better outcomes compared to increasing coal volumes that would need further expansion of the Railways infrastructure.
Small and medium industries (SMEs), educational institutes, banks, hospitals and residential communities will benefit from reducing their dependence on the grid and by producing their own electricity and selling some back to the grid. There is a strong case for the government to give a further push to distributed solar to protect India’s economic activities from frequent power outages.
The author is Energy finance analyst, IEEFA India
