India to face more power cuts due to coal shortage

FE Team | Published: April 12, 2022 22:40:52

CHENNAI, Apr 12 (Reuters): India is likely to face more power cuts this year as utilities' coal inventories are at the lowest pre-summer levels in at least nine years and electricity demand is expected to rise at the fastest pace in at least 38 years, officials and analysts say.
Power cuts could stifle industrial activity in Asia's third largest economy, just when economic activity was starting to recover after months of COVID-related lockdowns.
The shortage of electricity as a per centage of demand has shot up to 1.4 per cent over the last week, a Reuters analysis of government data showed, higher than the 1 per cent deficit in October, when India last faced a serious coal shortage, and the 0.5 per cent shortfall in March.
The southern state of Andhra Pradesh, home to plants operated by automakers such as Kia Motors (000270.KS) and drug manufacturers including Pfizer (PFE.N), is facing an electricity deficit of 8.7 per cent, the data showed, pushing it to resort to widespread power cuts.
Coal inventories at power plants had an average stock of nine days at the beginning of this financial year starting April 1, the lowest since at least 2014. Federal guidelines recommend power plants to have at least 24 days of stock on average.
"The problem is, even after Coal India and the coal ministry kept asking power plants to stock up, the utilities kept reducing their inventories," said Rajiv Agarwal, secretary general of the Indian Captive Power Producers Association.
Facor Alloys Ltd, a producer of ferrochrome which is used in manufacturing stainless steel, said on Monday it was reducing output by 50 per cent due to the power cuts in Andhra Pradesh.
Industrial states such as Gujarat and Maharashtra have resorted to load shedding, officials said, with government data showing eastern states such as Jharkhand and Bihar, and Haryana and Uttarakhand in the north reporting power shortages of over 3 per cent each.
"A commensurate increase in electricity generation to meet the increased demand is unlikely, limited by the availability of coal," Fitch Ratings said in a note on Thursday.