Home India Modi government itself is responsible for the possible crisis of coal and...

Modi government itself is responsible for the possible crisis of coal and electricity

It is easy for the Narendra Modi government to blame the UPA for the current crisis, but the fact is that it itself has failed miserably to accumulate coal reserves and boost power generation.

(Symbol Photo: PTI)

Already Indians are finding it difficult to bear the burden of skyrocketing prices due to unprecedented taxes imposed by the government on petrol and diesel, now the threat of backbreaking electricity rates is also looming on their heads.

The spot rates of electricity on the Power Trading Exchange had touched Rs 20 per unit a month ago, which used to be Rs 5 not long ago. Power deficient states will have to procure electricity from the market at very high rates.

This situation has been attributed to the shortage of coal, whose prices have gone up by nearly 300 per cent since January this year. Its prices have taken wings with the recovery of the global economy after the second wave of Kovid-19. In Europe, the price of gas has increased by 400 percent, which has created panic in the gas-based electric power market. China is increasing coal production in an emergency manner.

Rising energy prices have put the sword of danger on the resumption of economic growth in India and abroad. India has delayed in coming into action. The coal shortage warning came last week from Union Power Minister RK Singh, when coal stocks at several power plants were reduced to less than four days. Consumers will soon have to pay more for electricity purchased by power distribution companies at higher prices. The question is whether this shortage of coal could have been avoided?

The power minister has warned that power plants producing up to 100 gigawatts of thermal power have less than three days of coal left. For the next few weeks, even months, the entire country could witness severe disruption in power supply. Some Chief Ministers have written a letter to the Prime Minister regarding the crisis on the head.

Normally power plants keep coal reserves for at least 20 days. 30 percent of the total consumption of coal is met by imports. Coal imports have come down as international coal prices have risen to $270 a tonne from $75 a tonne earlier this year.

Some big private importers are repeatedly shying away from meeting their commitments citing unforeseen circumstances. Significantly, the share of coal-based electricity in India’s total electricity supply is about 66 percent. Why did India not increase its domestic production of coal to protect itself from the fluctuating international coal rates?

In order to tap India’s huge coal reserves, the Modi government had implemented comprehensive reforms in 2016 to boost domestic production by Coal India. Also, captive mines were allotted to private companies with large thermal power projects.

Where is the additional 130-150 million tonnes of coal-blocks auctioned to the private sector to produce electricity?

The then coal minister Piyush Goyal had described these reforms as a big step to correct the mismanagement inherited from the UPA government in the coal sector. But in reality the NDA has created a much bigger chaos. How, let’s understand it further.

The central government is saying today that insufficient stock of coal with power plants can lead to huge power cuts. But the central government is the main supplier of coal. It is owned by Coal India, a monopoly in the coal sector, which supplies more than 50 per cent of the coal consumed. And the largest thermal power generating company NTPC is also a PSU!

So it is logical to ask why global shortages and prices are in their place, but why has Coal India not increased production in the last four years. There has been a negative growth since 2017, during which the Modi government was talking loudly about ‘self-reliance’ in coal. CIL’s production fell by 7-10 million tonnes from 2017-18. This is nothing but a failure in the implementation of the policy.

Former coal secretary Anil Swarup, who led the coal sector reforms in the Modi government, wrote in the Bloomberg Quint last year that CIL had an additional reserve of Rs 5,00,000 crore in 2016. Instead of using it to boost production, a large part of this reserve went to the Center as dividend to bridge the growing fiscal deficit! Modi government should explain how this cut in investment happened against the target of the policy?

The private sector too disappointed us in the last five years. After the proudly touted coal sector reforms led by the then Union Coal Minister Piyush Goyal, around 80 mining-ready coal blocks were auctioned to power producers. Most of these remained on hold on these assets and did not create more than 120-140 million tonnes of new capacity.

The private sector was unconvinced of the consistent manner in which international coal prices remained at lower levels and preferred imports rather than investing in domestic capacity.

In general, private sector mining companies invest in the event of a jump in global prices. On the one hand, while the private sector delayed coal production, on the other hand the central government also did not pay any attention to it and did not allow further exploration of new coal-blocks.

In this way, the Modi government has created a new chaotic situation in the coal sector, the effect of which has reached to thermal power. Unfortunately, this crisis will not be confined to these areas alone.

Increased electricity prices will lead to energy inflation already maintained at higher levels due to increased prices of petrol and diesel. This will result in large-scale inflation of the economy and it will affect the income of the people. This is not good news for an economy struggling to get back on track.

(Click here to read this article in English.)

Categories: India, Politics, Special

Tagged as: Coal Crisis, Coal India Ltd, Coal Ministry, Economy, Electricity Consumption, Electricity Cut, Electricity Grid, Electricity Supply, Fuel Price Hike, Ministry of Power, Modi Govt, News, Power Crisis, power cut, power generation, RK Singh, The Wire Hindi