India Makes Power Plants Import Coal to Avert Looming Crunch

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(Bloomberg) — India has brought back requirements for power plants to import some of the coal they are using as it seeks to build stockpiles and avert electricity blackouts over summer. 

Generators will have to import 6% of their coal demand by weight through September to maintain “smooth operations,” the power ministry said in a note on its website. India is facing a deficit of 24 million tons of the fuel in the six months starting April, it said.

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Coal is crucial to India’s economy — it typically generates around 70% of the nation’s electricity — and it’s especially important for power plants to build inventories for the summer when scorching heatwaves lead to heavy air-conditioning use. 

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The country also mandated purchases from overseas for several months last year, but it’s still a fairly rare move as it runs counter to New Delhi’s aim of greater energy self-reliance.  

Daily coal supplies are falling as much as 300,000 tons short at the moment, the ministry said in the note. Without imports, stockpiles at plants using domestic coal “will progressively decline to zero, which will severely impact power supply position in the country,” it said.

India has been struggling with a lack of coal since the autumn of 2021, when a prolonged monsoon flooded mines. There were widespread blackouts last summer, with supply shortages exacerbated by soaring prices of seaborne coal following Russia’s invasion of Ukraine. 

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Stockpiles have grown over the past year, with inventories at power plants rising 31%. However, they are still only at a level that would last 12 days, well below the target of more than three weeks.

Domestic coal supply will be cut to plants that fail to meet the import rules, the ministry said. An early start to the imports is also needed to avoid congestion at ports and on transport networks, it said. 

One of the key limitations in India’s coal supply chain has been its rail network, which is inadequate for carrying the fuel to parts of the country that are far from mines and ports. It will take time to fully address the rail constraints, the ministry said.