Coal stock down to 4 days; is India too staring at a power crisis?

According to a Bloomberg report, coal stock at coal-based power plants are now at four days, just as power demand in the country is surging due to the festive season and industries steadily ramping up activity. India has a total installed capacity of 209 GW of coal-based power plants, which accounts for 70 per cent of the country’s power supply.

With domestic coal supplies limited because of issues at one of the largest coal mines in Dhanbad and low supply of imported coal due to high international coal prices, concerns are rising that the impending power crisis could stall the country’s still fragile economic recovery.

Brokerage firm Kotak Institutional Equities, however, is of the opinion that the power shortage in the country is more seasonal in nature than a representation of a structural issue. “The typical end-of-monsoon disruptions in demand and supply explain the balance mismatch that we view as temporary,” the brokerage said in a note.

The supply situation has been worsened by coal-based power plants undergoing their usual shutdowns in the monsoon season and private sector power generators at Mudra curtailing capacity due to low availability of imported coal.

“Elevated prices of imported coal will continue to lead to curtailed utilisation of these capacities. However, the same could be compensated by domestic coal-based capacities coming out of maintenance shutdowns,” Kotak Equities said.

Further, the brokerage firm expects the power demand situation to ease post October, as a drop in temperature due to the onset of winters reduces need for air conditioners and coolers. In India, power demand in November-February is generally 8 per cent lower than the rest of the year.