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India Is Not Facing A Coal Shortage

India has enough coal to meet demand from the power generation sector, the coal ministry said in a statement this weekend, as quoted by Reuters.

The statement comes on the heels of a warning by Delhi Chief Minister Arvind Kejriwal that the national capital territory was facing a crisis because of a coal shortage.

Indeed, some parts of India experienced supply shortages that led to power cuts. But according to the coal ministry, Coal India Ltd. is currently using its stockpiles of 40 million tons to add to power utilities' inventories of 7.2 million tons. The latter figure represents enough coal for four days of power generation.

This is certainly an improvement on a week ago when Reuters reported that more than half of India's 135 coal-fired power plants only had enough coal inventories for less than three days of operation. This compares with government guidelines that say power plants should have at least two weeks' worth of coal.

A return to growth in industrial activity led to a surge in electricity demand, which in turn spurred a price spike for all fossil fuels. This is now threatening that same growth that led to the price spike.

"The supply crunch is expected to persist, with the non-power sector facing the heat as imports remain the only option to meet demand but at rising costs," said Indian analytical services provider CRISIL, a unit of S&P. "Coal inventory at (Indian) thermal plants will improve only gradually by next March," the firm added.

The situation is potentially dire because of India's dependence on coal: it accounts for some 70 percent of the country's total electricity output. Power utilities, in their turn, account for about 75 percent of India's coal consumption. As prices continue up, some expect India to face further shortages that might lead to power rationing.

By Irina Slav for Oilprice.com

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