Original title: there is a serious shortage of coal in India, and the average surplus of coal-fired power plants is only 4 days.

[article / Observer Network Ju Feng]

Britain is not the only country with energy shortages. The Indian government has warned that the country's coal reserves at coal-fired power plants are grossly inadequate and the country is facing a profound energy crisis.

According to the Financial Times (FT) on October 4, data from India's Central Power Bureau (CEA) showed that as of September 29, 16 of the 135 coal-fired power plants had zero coal stocks, more than 80% of the power plants had coal stocks of less than a week, and more than half of them were not used for three days.

As of October 1, India's 135 coal-fired power plants had an average of only four days of coal inventory, according to the Ministry of Energy. The average inventory at the beginning of August was 13 days.

Energy vertical media "Energy Technology" (Power Technology) analysis said that the current crisis is mainly due to the surge in international coal prices, India's energy policy failure, causing energy producers to reduce imports in the context of rising international coal prices. The share of coal and electricity in India is 57 per cent and will shrink to 42 per cent by 2040, but the energy structure cannot be changed in the short term.

Self-made problems

Aurodeep Nandi, an Indian economist at Nomura Financial Consulting and Securities, said India's power industry was facing a "perfect storm" (meaning disaster caused by a combination of factors) as domestic demand grew but supply fell short.

In India, coal supply is inefficient. CIL,Coal India Limited, the state-run media giant, has failed to meet its annual production targets. CIL accounts for 83 per cent of domestic coal production and 63 per cent of supply. As a result of India's energy industry's dependence on CIL, the big state-owned enterprise is increasingly in short supply.

Internationally, the gap between global coal prices and domestic prices is widening, causing producers to be reluctant to import. Coal India said on Sept. 29 that rising global coal prices and freight costs have led to a reduction in power generation by factories that use imported coal, increasing production pressure on coal-fired power plants that use domestic coal mining.

Heavy rains in coal mining areas in September hit coal production and transportation, and the power plant itself failed to build up inventories before the bad season, according to India's power ministry.

The COVID-19 pandemic also exacerbated the power crisis. The epidemic led to a 15 per cent drop in investment in the energy sector in 2020, further increasing overall financial pressure, especially for many power distribution companies in India.

The Ministry of Power has told the power companies to build up inventory and it is expected that the demand level will remain at this level for quite a long time. However, large-scale power fluctuations and price increases are increasingly likely because Coal India has failed to provide the necessary domestic supply.

"Energy Technology" analysis, India is very dependent on coal and is still recovering from the "Delta" strain of the process, but ignored the coal supply problem, leading to the crisis is spreading. And India's large population and underdeveloped energy infrastructure mean its power crisis may be more severe and last longer than Britain's.

India will probably have to import more to make up for the gap between supply and demand, but this will come at a huge cost. Coal prices in Indonesia, one of India's main coal suppliers, rose to $200 a tonne in September from $60 a tonne in March.

Why is the price gap at home and abroad widening?

According to Reuters on October 1, domestic coal prices are basically determined by the Indian Coal Company, and the rise in coal prices will lead to a rise in energy prices, inflation and other side effects, so the company is very cautious about price adjustment.

In 2020, the Indian Coal Company has always kept coal prices stable, even though international coal prices continue to rise. Although the top management of the company said that the price would rise, they did not know when it would happen.

At the same time, global demand for fuel for power generation has pushed benchmark coal prices in Asia to record highs recently as the economy opens up. Recent power shortages in China have also pushed fuel demand higher.

Why can't the rising costs be passed on?

According to the International fuel Price Network (globalpetrolprices.com), India's sales electricity prices are set by the states themselves, and electricity prices are low in the world because state-owned distribution companies have absorbed higher import costs to keep electricity prices stable. But it has also left many distribution companies heavily in debt, totaling billions of dollars.

These distribution companies have been defaulting on power producers because of their debt, affecting cash flow and curbing further investment in the power generation industry.

Indian power producers that have long-term agreements with distribution companies are often unable to pass on higher input costs unless their contracts include provisions.

What is the impact on the global coal market?

India is the world's second-largest importer, consumer and producer of coal and has the world's fourth-largest coal reserves, mainly from Indonesia, Australia and South Africa, according to Reuters.

CRISIL, a unit of S & P, the rating agency, said dynamic coal prices in Australia and Indonesia were expected to continue to rise for the rest of the fiscal year because of supply constraints and strong demand in China and elsewhere.

Global coal prices rose more than 40 per cent between August and late September, when India's average weekly coal imports fell 30 per cent from January to July this year to less than 3 million tonnes, according to Kplr, a data analysis company.

In the last week of September, India's total coal imports fell below 1.5 million tons, the lowest level in at least two years. There is no record of any new import bids in October, according to the websites of utility companies in major coal-importing countries.

Who "wins" and who "loses"?

Shares of Indian power producers, including NTPC Ltd, TTPW and Torrent Power, as well as Coal India, have been rising strongly in recent weeks, driven by rising demand for electricity.

Due to high foreign coal prices, many non-power-generating coal consumers and imported coal power plants have reduced production. Indian officials say that while large-scale power outages seem unlikely in the near future, some parts of India could face power outages.