India has been steadily increasing its domestic coal production especially in the past two years but seems to be lagging behind in making good use of it i.e. adequate electricity generation. Coal India Limited (CIL), the state-owned miner, achieved a record production of about 540 million tonnes in the year gone by (FY16).
CIL has been increasing production by over 8% per annum especially in the past two years. Enhanced production has reduced India’s dependency on imported coal by over 15% in the same period.
Piyush Goyal, India’s Coal Minister, wants to dig-up a billion tonnes of domestic coal in the next four year which would totally stop such imports. Increasing coal production has translated into more electricity generation to the tune of 1.1 trillion units in 2015-16, an increase of about 6% as compared to the previous year. The nation’s coal-fired power plants have adequate supplies of coal which is a rarity. But from here onwards the happy story tapers down to the problem of plenty.
“CIL is actually looking forward to cut its production because there are not enough takers of coal,” says Ashish Gupta, energy analyst with Observer Research Foundation (ORF). There is not much demand from the power sector which is the dominant consumer of coal in India. Cash-strapped State Electricity Boards (SEBs) do not have money to buy even the coal-fired electricity which is considered the cheapest all over the globe.
“Many state electricity boards still prefer load shedding to supplying (so called subsidised) consumers 24×7 power supply.” “They are in genuine trouble,” adds Gupta.
The Central government’s recent plan to revive ailing SEBs has not convinced many as it simply shifts the burden for raising money for the SEBs) from SEBs to their respective state governments.
Energy experts feel that India needs a pragmatic approach now on to make good use of its increasing coal production. It is a dichotomy of sorts that increased production does not have a corresponding demand for it.
“From the social perspective, we should feel sorry about it,” says Lydia Powell, senior energy analyst with ORF.
Indians do not pay a very low price of power, adds Powell. Electricity tariffs are very high in India as compared to other countries. The whole clamour for increasing electricity tariffs is basically to offset the inefficiencies built into our electricity distribution sector. Some 25% of the total generated electricity is either lost in transmission or is simply stolen. “So, when the coal is (supposedly) under-priced but by the time it is converted into electricity the end consumer ends up paying a fairly high price which cannot be justified unless you factor in these inefficiencies,” says Powell.
Besides rooting out these inefficiencies, the way forward, she suggests, is to create more demand for electricity by supplying cheaper electricity to households and industries. Then it becomes a volume game for electricity suppliers by which they can survive well (financially).