India is facing a serious power crisis, how did it get here?

 October 7, 2021

For the first time in its history, India is facing a serious power crisis.

India, the world's second largest country by population (in terms of population) with a population of over one billion, has 70% of its source of electricity generation, but 135 coal-fired power plants there are now facing severe problems. More than half of the power plants have very low coal reserves.

And this situation is hampering India's resumption of economic growth.

Why is this happening?

It has taken months to reach this point.

The second wave of code in India proved to be very deadly for the country. But after that, the country's economy has slowly started to recover and with it the demand for electricity has also increased.

Compared to 2019, electricity consumption has increased by 17% in the last two months alone. In the same period, the price of coal in the world market has increased by 40% while India's imports have fallen to their lowest level in two years.

India is the fourth largest coal producer in the world, but it is also the second largest importer of coal in the world.

But power plants that used to rely on imported coal are now relying on Indian coal, adding to the pressure on locally supplied coal.

What could be the impact of this crisis?

Experts say importing coal for local needs is not a permanent solution.

"We have seen such shortages in the past, but this is the first time that coal has become so expensive," said Dr Orudeep Nandi, vice-president, India Economist and Nomura.

"If I am importing coal at high prices, then obviously I will also increase prices," he said. Any business shifts its costs to its buyers and this leads to inflation.

And if the crisis continues, the rise in electricity prices will reach consumers. Inflation in the market is also rising and everything from oil to groceries has become more expensive for consumers.

Vivek Jain, director of India Rating Research, described the situation as "critical".

"The situation is not very good and citizens should be prepared for the next five to six months," RK Singh, India's energy minister, told the Indian Express in a recent interview.

On the other hand, another senior government official, speaking on condition of anonymity to the BBC, acknowledged that the situation could be dire in the coming months.

Zohra Chatterjee, former head of India's state-owned Coal India Limited, which is responsible for 80 per cent of the country's coal supply, said it could be difficult for the wheel of Asia's third-largest economy to get back on track if it continued. Is.

Everything is powered by electricity, so every sector, be it the construction sector, or anyone else, will be affected if there is a shortage of coal."

Commenting on the current situation, he said that "India should wake up" and added that it was time for India to devise a strategy to get power from other sources instead of relying on coal.

What can the government do about it?

The question now is how India can achieve this balance where it can not only provide electricity to its nearly 1.5 billion population but also reduce its coal consumption.

Dr Nandi says the scale of the problem is so great that a short-term solution will do nothing.

"The problem is so big. The majority of our electricity comes from coal, but we have not yet reached the stage where we can release thermal energy.

Experts say the long-term solution is to create coal and other clean sources of energy.

"It's not a good strategy, nor is it possible for you to generate electricity entirely from 100 percent renewable energy sources," said Vivek Jane. Switching to clean energy sources is only possible if you have an alternative.

Other experts, including Zohra Chatterjee, say improving planning can help avoid the current crisis.

He said there should be more cooperation between Coal India Limited and other stakeholders.

What could happen next?

It is not clear how long the current situation will continue, but Dr Nandi is optimistic about the situation.

He says the monsoon season is coming to an end and the demand for electricity decreases in winter.

"It's a global trend," says Vivek Jane. "It's not just India. If gas prices come down today, people will go back to gas. This is a constantly changing situation.

But at present, the Indian government is working with its state-owned companies to increase production and increase coal mining to reduce the gap between supply and demand.

But most experts agree that India will have to find short-term solutions to the current crisis, but at the same time it will have to work on a long-term strategy and find alternative ways to grow locally. To meet the demand for electricity.