India Asks Coal Plants to Run Flat Out to Ease Power Crisis

(Bloomberg) -- India’s government ordered coal-fired power plants that run on imported fuel to operate at full capacity to address an escalating energy crisis that’s threatening economic growth.

The government took the unusual step of invoking a little-used provision in electricity laws to bridge a supply deficit that’s causing widespread blackouts. The order is valid until Oct. 31, the power ministry said in a letter posted on its website.

India is facing a crisis as power demand surges amid a blistering summer. Production of coal, the fossil fuel that accounts for more than 70% of electricity generation, has failed to keep pace, and the energy system is expected to come under further strain as demand tops a recent record in the coming weeks.

Read more: A 115-Degree Heat Wave Is Making India’s Power Crisis Worse

That situation has been made worse as global coal prices have surged on tight supply, prompting power plants using imported fuel to operate at reduced capacity to limit losses. Asia’s benchmark Newcastle coal futures have advanced more than 145% this year.

Of the 17.6 gigawatts of India’s power generation capacity that’s designed to use imported coal, just 10 gigawatts is currently operating, the power ministry said. Most of the plants have contracts with buyers that do not allow them to pass along rising fuel costs, it said. 

JSW Energy Ltd., which runs two such plants, said producing electricity with imported coal has become expensive. Lower generation from these plants coupled with the soaring temperatures are contributing to power shortages, Chief Executive Officer Prashant Jain said in an interview on Bloomberg Television. 

Boosting power generation from the curbed plants will help to meet some of the shortfall in the nation’s electricity supply, but won’t alone solve the current problems.    

Over the long-term India will aim to end the use of imported coal for power plants, Coal Minister Pralhad Joshi said Friday. There will also be immediate efforts to revive production from abandoned mines, and officials are preparing for the impact of the monsoon season from around June, when heavy rains can limit coal production, he said.

Powers under section 11 of the country’s electricity laws allow the government to force any power station to operate as directed in extraordinary circumstances, such as a natural calamity or a threat to national security or public order.

The ministry will take steps to ease the burden of high imported coal prices on the plants, according to the letter. 

Electricity buyers will need to agree a mutually negotiated price for supply with power producers, or accept benchmark rates under a formula being devised by officials from the ministry, Central Electricity Authority and the Central Electricity Regulatory Commission, the letter said. 

(Updates with comments from JSW Energy CEO in sixth paragraph.)

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