Electricity likely to be dearer on rain-inflicted coal shortage

New Delhi: With heavy rains flooding coal mines and transport affected, India's power sector is struggling to keep up with resurgent demands post-pandemic. Coal-fired power stations had an average of four days' worth of stock of fuel at the end of last month, the lowest level in years, and down from 13 days at the start of August. More than half the plants are on alert for outages.

India's energy sector is heavily dependent on coal-fired stations, with almost 70% of its power derived from coal. The shortage of such a key fuel is driving up spot power prices and may mean customers have to pay higher prices for electricity. Coal is also being diverted from smelting plants to meet demand.

Rainfall in Dhanbad, a key coal mining sector, has also contributed to flooding and a shortage of almost 60,000 - 80,000 tonnes a day to plants. The deficit is expected to be covered in October but the depleted stockpiles will take a while to recover according to experts.

Operators of coal-fired plants are facing a dilemma -- pay large premiums at domestic auctions to secure any available local supply or wade into a seaborne coal market where prices have soared to the highest on record. Already, the nation's government is drawing up guidelines in case it needs to bring idle power stations back into action.

"Because of imported coal prices shooting through the roof, plants running on domestic coal have had to do a lot of heavy lifting. Things are expected to get better as the rains abate," said Pranav Master, director for infrastructure advisory at credit rating firm Crisil Ltd as quoted by Bloomberg. The rising cost of electricity will hit consumers in months, which may also affect how the economy recovers in a post-pandemic growth phase.