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India's Coal Crisis Is Far From Over

India is facing a “severe and protracted” power crisis due to the price inflation of coal, which the country uses to generate as much as 75 percent of its power, Indian media report, citing S&P Global Commodity Insights.

India found itself in the middle of a power shortage as several factors combined, including rising coal prices, which discouraged imports, leaving stockpiles at critically low levels, and a heat wave that pushed demand earlier this year much higher.

The country is working on boosting its domestic production, and this went up by 28.6 percent in financial 2021/22, which ended on May 31. This was a record high, at 777 million tons. However, boosting domestic coal production to a level of self-sufficiency will take a long time, which coal is needed now to power the economy.

Meanwhile, the country was hit by a series of blackouts as a result of insufficient coal supplies, both domestic and imported. The situation became so grave that now the Indian authorities are threatening utilities that refuse to pay higher prices for imported coal to cut their access to local coal, according to S&P Global Commodity Insights.

In the past few weeks, the burden has eased, Reuters’ John Kemp wrote, as hydropower and wind generation increased seasonally, picking up the slack from coal. Yet the shortage problem remains, and it needs solving.

Russia has become an important source of import coal because of the discounts traders offer on Russian coal, while Indonesia’s most widely sold grade soared from a little over $65 per ton to $86 per ton.

Power shortages are likely to return in a couple of months, which makes securing enough coal stocks for September and October quite critical. By September, the monsoon will be over, and hydro and wind output will decline, and have to be replaced with other forms of generation capacity.

By Irina Slav for Oilprice.com

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