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November 1, 2012Indian Coal Shortage leads to Idle Power
There are massive power brownouts across India as electricity supply is shut down due to lack of fuel. Note the majority of India’s power capacity is built using thermal power plants run on coal. However India’s coal mining policy is a huge mess with Coal India the monopoly government producer being highly inefficient and ridden with corruption. While CIL is blaming the lack of coal production due to environmental problems, the real issue is that CIL is badly managed state owned company. Millions of tons of coal are stolen and the company is over bloated in terms of manpower. With little competition, the company has no incentive to increase production or improve efficiency.
With a gargantuan coal scam unearthed by the government auditing agency, the UPA Government is again in a paralysis state regarding the mining policy. Its top leaders are accused of stealing millions of dollars by awarding private coal mining contracts to kith and kin. Meanwhile 65 GW of the country’s electricity is said to be lying idle due to no fuel even as the running coal powered plants are with just one week’s inventory of coal. There have already been huge protests across the southern states where industries are being starved of power for days on an end.
Thermal power plants reaching a “critical” level—a euphemism for coal stocks being sufficient for less than a week—is nothing new in India. But if reports are to be believed, some 65,000 megawatts (MW) of power generation capacity is not being utilized because of a shortage of coal. Central Electricity Authority (CEA) data showed that at the end of September, 35 thermal power plants had less than a week’s supply of coal left. Of the 65,000 MW of stranded capacity, the public sector NTPC alone accounts for nearly 15,000 MW.
The Government has brought in some electricity reforms but they woefully miss the objectives of a complete overhaul of the mining and energy industry in India which is ridden with corruption and ad-hoc political discretionary powers.
Indian Government unleashed a number of half baked reforms which were pending for a long time but that has not helped the industry all that much. Though the stock markets have gone up, the companies in the reform sectors have not benefited much as the reforms have failed to address the core structural issues.
India’s crucial Power Industry has been in a mess for a long time now with muddled regulations in coal, gas and power adding up to the electricity companies woes. While the Government has come up with a plan to reduce the debt of the bankrupt state electricity distributors, it has failed to adequately address the issue of coal supply to the thermal power plants. Coal India which is India’s monopoly miners continues to be one of the most inefficient and corrupt organizations. The Government has failed to break this monopoly or even address the issues of massive power theft in power transmission.
This new plan has following features:
1) Reduce the Power Purchasing Agreement Tenure to 5 years from 25 years.This would make it easy to change the prices of power purchased to reflect the changed realities
2) Some sort of fuel cost indexation for electricity tariffs .The reason is that prices of imported coal has risen dramatically which has made the large UMPP get stuck because the revenues don’t meet the costs.
This plan will take 6 months to be implemented as the government talks with stakeholders like states which are reluctant to change the power prices decided in the PPA with the earlier UMPP being built by Tata Power and Reliance Power in Gujarat and Andhra Pradesh.
The country has to reduce the reliance on this dirty fossil fuel and look to alternatives like Solar Power where costs have fallen dramatically in the recent past. More focus should be put on hydro energy as well as it has great benefits.China is looking to add 400 GW of hydro capacity in the next 10 years compared to India’s total current capacity of 182 GW.
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