India takes a U-turn on reducing dependence on imported coal by invoking the Electricity Act

After promoting Atma Nirbhar Bharat and reducing dependence on imported coal, India has taken a steep U-turn and asked all imported coal-based power units to run at full capacity and is pushing states to import coal to increase blending to supplement domestic coal.

The government invoked Section 11 of the Electricity Act, which is reserved for “extraordinary circumstances” such as threat to security of the state, public order or natural calamity or such other circumstances.

These are extraordinary circumstances. Power demand in the country has gone up to all time highs driven by economic activities ramping up and unusually hot summers. But coal to run the power plants has remained constrained.

As many as 90 of the 150 domestic coal-fuelled units had critically low average stock as of May 7, which means they had less than 25 percent of their normal requirements, according to the Central Electricity Authority (CEA). The reasons– output constraints of Coal India Ltd, insufficient rail capacity to transport and in some cases payment related issues.

Last week on May 5, in a letter asking imported coal-based plants to scout for coal in the global market to run at full capacity, the ministry of power said, “The demand for power has gone up by almost 20 per cent in energy terms. The supply of domestic coal has increased but the increase in supply is not sufficient to meet the increased demand for power. This is leading to load shedding in different areas. Because of the mismatch between the daily consumption of coal for power generation and the daily receipt of coal at the power plant, the stocks of coal at the power plant have been declining at a worrisome rate.”

Of the total 15 imported-coal based power plants in the country of a total capacity of around Rs 17,600 megawatt (MW), 10 have critically low coal. Almost 7,600 MW of this capacity is not running. Power generators had signed power purchase agreements (PPAs) with states at a time when coal was trading around $90 per tonne, but coal prices soared and generators asked the respective state-discoms to revisit the agreements to accommodate for the high raw material cost but they declined.

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