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s article is aimed to critically examine the reasons amounting to 1.08 million tonnes in September 2021,
that media reports attributed to being the cause of the compared to 4.03 million tonnes a year ago and 5.23
coal shortage. The findings are relevant to policymakers million tonnes in September 2019.
and businesses, as identification of the true reasons
behind the coal crisis in India would help businesses A third reason given was the low accumulation of coal
formulate an appropriate mitigation plan in case similar by thermal power plants (gencos) in the country. While
circumstances arise in India in the future. The rest of there is no observable parameter in the public domain to
the article is organized as follows. Section II presents a quantify low accumulation of coal by gencos, despatch
review of reports on the topic of coal shortage, as has data of coal from Coal India Limited and other captive
been presented in literature and in the media. Section mines can serve as a proxy for assessing the accumulation
III outlines the methodology, definitions and hypothesis of coal by the power plants.
building for the models as outlined in the past reports
and literature. We present our findings and conclusions Also, it was widely proclaimed that much of the hindrance
in Section IV and V. in accumulating sufficient stock was due to structural
problems in the sector, more specifically due to the large
REVIEW OF REPORTS overdue amount to the generating companies (gencos)
from the distribution companies (discoms). It was
According to media reports, as on 4th October 2021, 16 reported that poor financial health of discoms hinders
coal-fired power generation plants with installed capacity their ability to make timely payments to the gencos for
of 17.4 GW (~10% of total Installed Capacity of Coal fired power supplied. This in turn affects the genco’s ability to
plants with linkage from Coal India Limited) had zero coal pay the coal suppliers in a timely manner. Several reports
stock, and another 59.7 GW (~36%) had coal stocks with highlighted that the outstanding dues from discoms
less than two days of stock available. In total, plants with to gencos had risen to very high levels, affecting the
an aggregate of 132 GW installed capacity (~79%) had gencos ability to make timely payment to Coal India,
critical and super critical levels of coal stock, indicating though reports were inconclusive as to whether these
less than four days of stock. The situation drew wide dues had led to curtailment of supplies from Coal India
comparisons to the ongoing power crisis in China, which to the gencos. The reports suggested precarious financial
had led to long periods of blackouts in several provinces situation of gencos led them to operate with bare
all across China. minimum stock of coal. As explained, the large overdues
can be traced back to overdues to gencos from discoms
Various reports analyzed independently the reasons (distribution companies).
behind the coal shortage, and broadly four major reasons
for the shortage of coal surfaced in the media reports. In light of the reduced congestion in freight movement
The first was a sharp uptick in power demand. Several due to the pandemic, an unprecedented surge in
media reports cited an increase in power demand to the power demand with gradual unlocking of restrictions
levels of 124 BU in August 2021, compared to 106 BU in on economic activity, and large fluctuation of prices of
August 2019. imported coal due to global events, this incident offers
an opportunity for a study that is unique and irreplicable.
A second reason that was cited in the reports highlight the Hence, it is worthwhile to critically examine these reasons
rising cost of imported coal, especially due to increased in the light of the situation induced by the pandemic.
demand from China. The increased prices of imported While an increase in the power demand would naturally
coal led to a decline in coal imports to the extent of 73% cause increased coal consumption and decrease the days
in September vis-à-vis the previous year. Coal import by of stock, the other reasons are less intuitive. For instance,
distribution companies fell to a 7-year low with imports while increased cost of imported coal is expected to
16
that media reports attributed to being the cause of the compared to 4.03 million tonnes a year ago and 5.23
coal shortage. The findings are relevant to policymakers million tonnes in September 2019.
and businesses, as identification of the true reasons
behind the coal crisis in India would help businesses A third reason given was the low accumulation of coal
formulate an appropriate mitigation plan in case similar by thermal power plants (gencos) in the country. While
circumstances arise in India in the future. The rest of there is no observable parameter in the public domain to
the article is organized as follows. Section II presents a quantify low accumulation of coal by gencos, despatch
review of reports on the topic of coal shortage, as has data of coal from Coal India Limited and other captive
been presented in literature and in the media. Section mines can serve as a proxy for assessing the accumulation
III outlines the methodology, definitions and hypothesis of coal by the power plants.
building for the models as outlined in the past reports
and literature. We present our findings and conclusions Also, it was widely proclaimed that much of the hindrance
in Section IV and V. in accumulating sufficient stock was due to structural
problems in the sector, more specifically due to the large
REVIEW OF REPORTS overdue amount to the generating companies (gencos)
from the distribution companies (discoms). It was
According to media reports, as on 4th October 2021, 16 reported that poor financial health of discoms hinders
coal-fired power generation plants with installed capacity their ability to make timely payments to the gencos for
of 17.4 GW (~10% of total Installed Capacity of Coal fired power supplied. This in turn affects the genco’s ability to
plants with linkage from Coal India Limited) had zero coal pay the coal suppliers in a timely manner. Several reports
stock, and another 59.7 GW (~36%) had coal stocks with highlighted that the outstanding dues from discoms
less than two days of stock available. In total, plants with to gencos had risen to very high levels, affecting the
an aggregate of 132 GW installed capacity (~79%) had gencos ability to make timely payment to Coal India,
critical and super critical levels of coal stock, indicating though reports were inconclusive as to whether these
less than four days of stock. The situation drew wide dues had led to curtailment of supplies from Coal India
comparisons to the ongoing power crisis in China, which to the gencos. The reports suggested precarious financial
had led to long periods of blackouts in several provinces situation of gencos led them to operate with bare
all across China. minimum stock of coal. As explained, the large overdues
can be traced back to overdues to gencos from discoms
Various reports analyzed independently the reasons (distribution companies).
behind the coal shortage, and broadly four major reasons
for the shortage of coal surfaced in the media reports. In light of the reduced congestion in freight movement
The first was a sharp uptick in power demand. Several due to the pandemic, an unprecedented surge in
media reports cited an increase in power demand to the power demand with gradual unlocking of restrictions
levels of 124 BU in August 2021, compared to 106 BU in on economic activity, and large fluctuation of prices of
August 2019. imported coal due to global events, this incident offers
an opportunity for a study that is unique and irreplicable.
A second reason that was cited in the reports highlight the Hence, it is worthwhile to critically examine these reasons
rising cost of imported coal, especially due to increased in the light of the situation induced by the pandemic.
demand from China. The increased prices of imported While an increase in the power demand would naturally
coal led to a decline in coal imports to the extent of 73% cause increased coal consumption and decrease the days
in September vis-à-vis the previous year. Coal import by of stock, the other reasons are less intuitive. For instance,
distribution companies fell to a 7-year low with imports while increased cost of imported coal is expected to
16
