EXCLUSIVE-India faces deeper coal shortages, heightening power outage risks

India is expected to face a bigger coal shortage in the quarter ending September due to expectations of higher power demand, an internal Energy Ministry presentation seen by Reuters showed, increasing the risk of widespread power outages.

The energy-hungry country expects local coal supply to fall short of demand by 42.5 million tonnes in the September quarter, 15% higher than expected, due to a higher growth in electricity demand and lower production at some mines. The gloomy forecast shows the scale of India’s fuel shortage, at a time when annual electricity demand is growing at the fastest rate in at least 38 years and global coal prices are trading at near-record highs due to a supply shortage resulting from the Russian-Ukrainian crisis.

India has stepped up pressure on utilities to increase imports in recent days, warning of cuts in the supply of coal mined in the country if power plants do not build up coal stocks through imports. However, one of the slides in the presentation showed that most states had not yet awarded coal import contracts and that Indian utilities would run out of coal by July if no coal was imported.

Only one state had awarded a coal import contract as of late April, according to an Energy Department import status report reviewed by Reuters. India expects domestic coal supply of 154.7 million tonnes, 42.5 million tonnes less than projected requirement of 197.3 million tonnes in the September quarter, according to the presentation . It previously predicted a shortage of 37 million tonnes.

The presentation was made Friday in a virtual meeting attended by federal coal and power ministers, with senior federal and state energy officials in attendance, according to two government officials familiar with the matter. . The federal coal and power departments did not immediately respond to a request for comment. Details of the presentation have not previously been released.

Coal inventories at power plants have fallen about 13% since April, translating to eight days of coal requirements, the lowest level at this time of year in at least nine years. Rising demand for coal could also stifle stockpiling efforts at power plants. India now expects utility coal demand to be 784.6 million tonnes for the year ending March 2023, the presentation showed, 3.3% higher than previously forecast. .

The projected annual coal shortage is now 49.3 million tonnes, nearly three times the 17.7 million tonnes previously projected, the presentation showed. India has reconciled its coal demand projections after stronger-than-expected power demand growth in April, when power consumption hit a record high due to soaring temperatures.

On Friday, many states called on the federally run Coal India to import coal in bulk and distribute it between states, officials said. The states cited high world prices and supply issues to seek aggregate imports, the officials said, adding that the coal minister had told the states demand would be accommodated.

Higher imports could put additional pressure on state government-owned electricity distribution companies, which are already in debt and owe producers billions of dollars, as they have historically absorbed higher input costs. to keep prices stable. Coal India did not immediately respond to a request for comment. The world’s largest miner has not imported coal in recent years.

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