Why is India facing its worst power crisis in over six years?

Here is a summary of the factors behind the crunch.
Image: Ruhani Kaur/Bloomberg

India is facing its worst power crisis in over six years as a heatwave bakes vast swathes of South Asia, causing widespread power outages.

Why is India facing a power crisis?

A surge in air-conditioning demand due to an unrelenting heatwave this year, and an economic recovery due to removal of all Covid-related curbs on industrial activity, pushed power demand to record highs in April.

New hybrid work models adopted since Covid-19 struck in 2020 have resulted in millions of Indians working from home, boosting residential daytime power use. The gap between power supplied and consumed has often been wider at night when solar supplies stop and air conditioning demand surges.

Many power plants ran out of fuel as a result of increasing output aggressively, with average coal stocks held by utilities at the lowest for this time of the year in at least 9 years.

Despite record production by state-run Coal India, which accounts for 80% of domestic coal output, many utilities were not able to replenish stocks due to Indian Railways’ inability to supply enough trains Coal India.

What is India doing?

The crisis has pushed India to reverse a policy to slash thermal coal imports to zero, and asked utilities to continue importing for three years.

It also invoked an emergency law to start generation at all plants running on imported coal, many of which are currently shut due to high international coal prices.

The low inventories have forced Coal India to divert supplies to utilities at the expense of the non-power sector. State-run Indian Railways has cancelled passenger trains to free up tracks for the movement of coal.

India is also planning to reopen more than 100 coal mines previously considered financially unsustainable.

Who is impacted by the crisis?

According to citizen-survey platform LocalCircles, nearly half of its 35,000 respondents from across the country said they faced power outages this month.

Factories in at least three states have been forced shut for hours as authorities struggled to handle demand.

As the supply of coal to power plants operated by energy intensive industries was restricted, factories started drawing power from the grid, hiking industrial costs and putting further pressure on overworked coal-fired power plants.

Power use by eastern Odisha state, home to the country’s biggest aluminium smelters and steel mills, rose over 30% in October-March, nearly ten times the average national growth.

Whats next?

Officials and analysts expect India to face more power cuts this year due to low coal inventories and as electricity demand is expected to rise at the fastest pace in at least 38 years.

Power generation from coal-fired plants, which account for nearly 75% of India’s annual electricity output, is expected to grow 17.6% this year, the highest rate in over a decade.

Coal India’s production and dispatches by train are likely to be hit during the annual June-September monsoon season.

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