India to face more power cuts due to coal shortage, soaring demand

Coal trains to utilities from April 1-6 at 379 a day versus 453 needed

India is likely to face more power cuts this year as utilities' coal inventories are at the lowest pre-summer levels in at least nine years and electricity demand is expected to rise at the fastest pace in at least 38 years, officials and analysts say.

Power cuts could stifle industrial activity in Asia's third-largest economy, just when economic activity was starting to recover after months of COVID-related lockdowns.

The shortage of electricity as a percentage of demand has shot up to 1.4% over the last week, a Reuters analysis of government data showed, higher than the 1% deficit in October, when India last faced a serious coal shortage, and the 0.5% shortfall in March.

The southern state of Andhra Pradesh, home to plants operated by automakers such as Kia Motors and drug manufacturers including Pfizer, is facing an electricity deficit of 8.7%, the data showed, pushing it to resort to widespread power cuts.

Coal inventories at power plants had an average stock of nine days at the beginning of this financial year starting April 1, the lowest since at least 2014. Federal guidelines recommend power plants to have at least 24 days of stock on average.

"The problem is, even after Coal India and the Coal Ministry kept asking power plants to stock up, the utilities kept reducing their inventories," said Rajiv Agarwal, secretary general of the Indian Captive Power Producers Association.

Facor Alloys Ltd., a producer of ferrochrome which is used in manufacturing stainless steel, said on Monday it was reducing output by 50% due to the power cuts in Andhra Pradesh.