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Rising coal prices force Tata and Adani Gujarat power plants to slash imports as power demands soar


India seems to be on track to making a recovery after the devastating global pandemic that stopped all economic activities. While this is a huge positive, the sudden resumption of economic activities has resulted in soaring power demands. In September, India’s power consumption grew by 1.83 per cent and reached 114.49 billion units (BU). For comparison, in the same period last year, power consumption was 112.43 BU.

The spike in power consumption has sent power utility companies scrambling to secure their coal stocks as supplies dwindled to critical levels. The prices of sea-borne coal has also hit record highs, slashing imports by companies’ dependent on them. Of note is the Tata and Adani Gujarat power plants that reduced the coal imports amid soaring coal prices. This is a significant development as both plants have been the top buyers of imported coal to fuel their respective plants at Mundra.

Alarmed by shortages that has forced thermal power producers (TPP) to cut back on power generation, the Centre directed domestic coal producers to increase production. However, this solution only works for the plants not dependent on coal imports. What is worrying is that in April, power plants and coal producers like Coal India had record inventory levels. In a short span of three months, the sudden dip in coal stocks has even forced some TPPs to shut down operations for good.

That being said, India is no stranger to coal shortages in the past. The country is trying to become coal sufficient and leverage its resources, which is the fourth largest in the world. Despite the Centre’s efforts, this has not been realized till date and is a thorn in the power sector’s side. The thermal power units of Tata and Adani in Gujarat are dependent on imported coal to fuel their fires. Both plants make use of coal imports from Indonesia which, lately, has seen a drastic increase in prices. 

Adani Power is the largest private thermal power producer in India with a power generation capacity of 12,450MW. The company has presence in the five state of Gujarat, Maharashtra, Rajasthan, Karnataka and Odisha, and also owns a 40MW solar project in Gujarat. The Adani Gujarat power plant in Mundra was the first of its kind to be set up under the Clean Development Mechanism (CDM) of the Kyoto Protocol. The plant is a significant improvement over the conventional type as the supercritical technology employed reduces carbon emissions by 20 per cent with a 40 per cent efficiency increase in output.To tackle the coal crisis and meet power demands, the government has allowed the sale of power from the Tata and Adani Gujarat plants from idle capacity. This arrangement will go on for a month as the Centre tries to nullify the effect of coal shortage in 73 power stations. Nonetheless, these are all stop-gap measures by the government to an issue that requires a permanent solution. Even as developed countries call for the transition to greener power sources, it puts a serious question mark on the feasibility of the call to action. Countries like India, still require coal as fuel to power the switch to alternate options.

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