Struggling with power crunch, India considers strategic reserves for gas, imported coal

India is considering maintaining strategic reserves of natural gas and imported coal like the country’s strategic petroleum reserves, to address future supply shocks, as the energy hungry nation battles a crippling coal shortage.

A surge in power demand combined with a fall in imports due to high global coal prices have led to supply disruptions and power cuts lasting up to 14 hours a day despite record supplies from state-run Coal India, the world’s biggest coal miner.

Alok Kumar, India’s power secretary, said countries increasingly meet their own needs first when there is a supply crunch, citing the example of Russia curtailing supplies to European nations because they wanted more gas locally.

“So let us start thinking and discussing about keeping a strategic reserve of gas and imported coal, so that economies are able to tide over these supply shocks for about a month or so,” Kumar said at the South Asia Power Summit organised by the Confederation of Indian Industry.

Most of India’s 135 coal-fired power plants have fuel stocks of less than three days. Coal accounts for over 70% of India’s electricity generation. India, the world’s second largest coal importer with the world’s fourth largest reserves, must also compete for supplies with China, which too is under pressure to ramp up imports amid a severe power crunch.

“High prices will make energy security very challenging if we don’t have a well thought out strategy,” Kumar said. It was not immediately clear if potential strategic reserves would primarily be for power plants or would also address coal demand from consumers such as steel plants and aluminium smelters.

India on an average imported nearly 21 million tonnes of thermal coal every month before the coronavirus pandemic, out of which the power sector directly accounted for about 6 million tonnes. The country mainly imports coal from Indonesia, Australia and South Africa. India’s Adani Enterprises-owned Carmichael mine in Australia has said it is on track to export its first coal in 2021.

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