Right before Diwali, when power demand is set to rise, India is scrambling to secure coal supplies as inventories decline below critical levels.
Coal generates 70 percent of the nation’s electricity and coal-fired power stations have an average of four days’ stock left
. Over half the coal plants are on alert for outages.
The major reason? The surge in power demand from industries and sluggish imports as record global prices push power plants to their limits. Coal India, the biggest producer of coal in India saw its stockpile dwindle when India was grappling with the second wave of coronavirus outbreak, but its effects were not seen until August.
A. News roundup
Fuel prices rise across the board
The price of liquefied petroleum gas was also hiked by Rs 15 per cylinder on Wednesday. A cylinder in Delhi now costs Rs 899.50
. Moreover, Mumbai’s Mahanagar Gas has hiked the prices of CNG and PNG by Rs 2 in the region.
Power Minister denies power shortage
“We get coal every day from coal mines. In between, there was some difficulty because of continuous rains in coal-producing areas, so mining had become difficult. Now, the production has picked up again, so we are okay,” Singh said. These statements came a day after the ministry allowed captive mines or the mines that produce coal solely for their own use to sell half of their output in the open market.
He also said there is no shortage of power
and that states can buy as much power as they want, they just have to pay for it. “The shortage is not because of lack of regeneration,” he said, “they are probably not able to buy power because they don’t have money. Or there may be some distribution glitches. But no lack of power.”
Power crunch could fan inflation fears, says report
Higher fuel prices and coal shortage can risk fanning inflation and slowdown India’s economic growth, a Bloomberg report said Wednesday. Coal shortage spells industry closures and higher imports at a time when crude oil prices are at a seven-year high.
B. Here’s how the crisis impacted markets today
Oil and Natural Gas Corporation (ONGC), state-owned oil and natural gas company, surged over 2 percent today whereas metals declined, with Nifty Metal slipping nearly 3 percent. Metals are pressured by the energy crisis in India and China, and a surge in the US dollar. The crunches continue to weigh on manufacturing, smelters, and downstream companies. Also, the Evergrande concerns continue to cast a shadow.
While sliding metal prices are justified, experts say the movement in energy stocks is not. Kotak Institutional Equities said there is no fundamental change for regulated utilities and downstream oil firms. Even companies that benefit from higher energy prices in short term face an existential threat from renewable energy players unless they can turn around their business models, it said.
(Edited by : Yashi Gupta and Kanishka Sarkar)