The Modi government has created an artificial electricity shortage during the festival season, which normally sees a high electricity demand. With the opening of the economy post-Covid-19 second wave, power demands were expected to pick up in October. This, coupled with the festival season, would obviously see a large up-tick of power consumption. Currently, there is a shortfall during the evening peak hours of about 7,000 MW, most of it in Punjab, Rajasthan, Jharkhand and Bihar. Many others are staring at impending blackouts. Notices of load shedding have been issued in Delhi, and other states have warned of possible power cuts.
We must recognise that this shortage is entirely artificial. We have an installed capacity of nearly 390,000 MW. With the current evening peak of about 170,000 MW, not even 50% of our installed capacity, there should not have been any load shedding. Why then do we have a crisis and serious shortages in Punjab, Jharkhand, Rajasthan?
Why did the power and the coal ministries not coordinate to provide adequate coal stocks with the power stations for this anticipated increase in demand? The Power Ministry admits that coal stocks in 135 power stations in the country are running low. According to Central Electricity Authority’s (CEA) Reports, their average stock is about four days, instead of at least 20 days that plants are supposed to maintain.
As the Power Ministry itself admits, we have a serious shortage of coal stock at the power stations. Out of 135 power stations in the country, the CEA’s Fuel Management Division’s Daily Fuel Report on coal stocks shows that 16 plants with a generation capacity of 17,000 MW have zero coal stock. Another 76 with 98,000 MW capacity have less than four days of coal stock!
We are familiar with the impact of monsoon rains on coal production. The eastern region with many coal mines faces rains and floods in this period. That is why Coal India had asked power plants to create buffer stocks before the monsoons when production falls. Which the power plants, including the NTPC, run by the central government, did not do.
The rise in the price of coal in the international market from $60 per tonne last year to $200 this year has compounded the problem. Tata and Adani’s Mundra station, which depends on imported coal, have significantly reduced their production. It is only the high spot price of electricity – currently running at Rs. 16-20 per unit in peak hour shortages that make it possible to operate plants with imported coal.
India has one of the largest reserves of coal in the world. So why do we have a shortage of coal in the country, particularly for supplying the vital powder sector? Why is it that plants have been running with low stocks of coal for the last few months? Yet, the government did not plan for the inevitable shortage with the re-opening of the economy? And with the festival season during which India’s power requirements peak? Is it not criminal negligence of the ruling government?
The coal minister Pralhad Joshi has blamed the coal shortage on the increase of the international price of coal and heavy rainfall. Small mercies, he has accepted that there is a coal shortage—something which most of Modi government’s spokespersons refuse to accept—and not blamed anti-national forces and the opposition parties this time for its crisis.
The scapegoat this time is Coal India, the world’s largest coal mining company. Coal India had a cash reserve of Rs. 40,000 crore in 2016. In that year alone, it had paid a dividend of more than Rs. 17,000 crore to the central government. It is this systematic bilking of Coal India every year which has led to its inability to expand production. Instead of funding its own development, Coal India has been funding the Modi government’s deficit; or more accurately, funding the tax breaks that the Modi government has provided to the super-rich—the Ambanis, Tatas, the Adanis, the Birlas; and their ilk.
Coal India is also the largest funder of Indian Railways through the freight it pays to transport coal to power plants. It also supplies 85% of India’s domestic coal consumption, even though handing over coal mines to the private sector has been common to the policies of both the UPA and the Modi governments. The bitter truth—hard for the “market gods will do everything” crowd to swallow—is that markets do not work for infrastructure; as we witness with the coal sector again.
For the last two years in a row, Coal India’s production fell, as the Covid-19 pandemic hit the industry hard, so also the demand for energy. But as the economy opened up post the second Covid-19 wave, it did not need rocket science to know that the demand for power would rise, and so also the requirement of coal. What did the Ministry of Power and Ministry of Coal do from July to October to see that coal-fired power plants had adequate reserves?
Why do power plants not maintain stocks, in this case at least 20 days of prescribed inventory, that they are supposed to carry? The answer is simple: inventory is an extra cost. Less the stocks a plant has to maintain, the more its profits. This is the Just-in-Time principle of capitalist production. For individual firms, it is better to have a lower inventory, even if it means lowering production occasionally and impacting others. These are good “capitalist” principles; or the laws of the market that the public sector supposedly does not know.
For the last few years, India had the option of importing coal from Indonesia and Australia to make up for the shortfall of indigenous coal production. Not this year. As the global economy also opens up, the price of coal in the international market has jumped up more than three times. It has gone from $60 to $200, leading to a curtailing of power production from plants set up primarily for using imported coal.
When supply and demand mismatch occurs in the market, we need to have stocks of raw materials or finished goods to meet the fluctuating demand. In the power sector, the key problem is storing electricity as finished goods. While coal-fired, plants can be ramped up or down with adequate coal reserves, what happens as we switch to renewables and move away from coal?
The problem is not simply the mismatch between solar and wind power, and our daily demand. Our peak demand is in the evening when there is no sun. The solution being offered is grid-scale battery banks, meaning huge batteries connected to the grid that can store electricity during sun-light hours and release it at night. The current crisis brings out that renewables not only have a day-night cycle problem but also a seasonal problem. Germany, which bet big on wind energy, has been hit by an unexpected stilling of winds, leading to an increase of supply from coal-fired plants.
So how do we plan for such seasonal variations—monsoons and festival season demands—when we shift to green power? A simple solution, which has yet to find favour among our planners, assuming we have any left, is pumped storage. Our existing hydro resources can be easily re-purposed to act as giant batteries, pumping up water when there is a surplus in the grid, and producing power when there is a demand. Market forces, of course, do not like solutions that do not provide quick returns on capital and are beneficial to society in the long run. That is why the push for utility-sized batteries.
The current crisis of not having coal with the power stations is of a lack of planning coupled with sheer incompetence. The Modi government failed in its fundamental task of coordinating between the power and the coal ministries and is now searching for scapegoats. It believed that the market would magically solve all its problems, and there was no need to plan the additional coal that the power plants would require with the opening of the economy. The country is paying for the government’s incompetence in planning and handling simple inter-ministerial coordination. And we learn the lesson that a NITI Aayog is not a substitute for a Planning Commission, which the Modi government abolished.