Coal India to import fuel as power shortage looms large
State-run Coal India will import coal for utilities run by the government and private companies as the shortage of fuel raises concern about renewed power outages across the country, a power ministry letter reviewed by Reuters showed. This comes as India is reportedly expected to witness a wider coal shortage during the third quarter of 2022 due to higher electricity demand.
Why does this story matter?
This would be the first time since 2015 that Coal India has imported the fuel. The move reflects efforts by state and central officials to stock up on coal to avoid a repeat of April when India witnessed the worst power cuts in over six years. Reportedly, coal inventories in power plants declined by 13% since April to the lowest pre-summer levels in years.
What do we know about the letter?
The letter was reportedly sent to all utilities, and top central and state energy officials, including the Union Coal Secretary and the Chairman of Coal India. "Coal India would import coal for blending on government-to-government (G2G) basis and supply...to thermal power plants of state generators and Independent Power Producers (IPPs)," the power ministry said in the letter dated May 28.
Decision taken after states suggested centralized procurement: Ministry
In the letter, the ministry said the decision was taken after nearly all states suggested that multiple coal import tenders issued by states would lead to confusion and hence sought a centralized procurement through Coal India. Moreover, in its letter, the ministry asked states and IPPs to suspend all tenders for importing coal that is "under process."
Government pushing utilities to increase imports
Lately, the Centre was pushing utilities to increase coal imports to blend it with local coal. It also warned utilities of cuts to their domestic mined coal supply if they don't build up coal inventories through imports. However, the ministry on Saturday asked utilities to suspend import to "await the price discovery by Coal India through G2G route...to procure coal at least possible rates."
