India says coal situation is improving

Commenting on the reports about the shortage of coal at power plants in India, the country’s power minister Raj Kumar Singh told a local television channel on October 6 that the supply situation is improving and there was no risk to the grid.

Singh told Mumbai-based CNBCTV18 that India's coal production has seen some recovery in the last few days and that the coal crunch was starting to ease.

“Actually, we get coal every day from the coal mines. In between, there was some difficulty because of continuous rain in the coal-producing areas and mining became difficult. After that, it has picked up again so, we are okay,” he said.

In the past week, there have been multiple media reports suggesting that coal-based power plants have an average of about four days of coal stock left – much less than the government's recommendation of 14 days. There is a fear that India may face a power outage because of the shut down of power plants. However, at this moment there are no reports of any blackouts in any part of the country.

“My priority is to provide electricity that this country requires for growth. We will provide that and I am fully confident that we shall be doing it,” Singh told the television channel.

Meanwhile, the Indian government on October 5 allowed coal mines that produce coal for the exclusive use of the owners, called ‘captive mines’, to sell 50% of their annual production in the open market. The move is being seen as a way to address the coal shortage that power plants in India are facing.

"Availability of additional coal will ease pressure on power plants and will also aid in import substitution of coal,” the Indian coal ministry said in a statement. Coal-based power plants account for nearly three-fourths of India’s annual power output. 

“The ministry of coal has amended Mineral Concession Rules, 1960 with a view to allowing sale of coal or lignite, on payment of additional amount, by the lessee of a captive mine up to 50% of the total coal or lignite produced in a financial year, after meeting the requirement of the end use plant linked with the mine," it added.

This amendment is applicable for both the private and public sector captive mines. With this amendment, the ministry is creating a more liquid market, which should more coal is produced and more arrives at the stations where it is needed.

There have also been reports of India buying Australian coal that’s been stranded inside China for months. The fuel is being bought at a $12 to $15/metric ton (mt) discount to fresh shipments from Australia and is some of the cheapest thermal coal relative to its quality on the market, Bloomberg reported last week.

Indian firms have bought nearly 2mn mt of Australian thermal coal that has been sitting in warehouses at the Chinese ports, Bloomberg added.