The massive breakdowns in the Northern, Eastern and North-Eastern Grids in the last couple of days resulting in major power failures in large parts of the country might have been restored, giving a sigh of relief to the people. But it has once again highlighted the vexed issue of huge shortfall in power generation to meet the ever-growing demand of power in the country.

Electricity consumption in India, currently at some 600TWh annually, is set to double by next decade.

The economy is passing through a difficult phase. Recent statistics have suggested a fall in industrial production to less than 5 per cent. Revised GDP projections have slipped to less than 6.5 per cent for this year. The electricity sector is facing problems with availability of coal.

According to the Central Electricity Authority (CEA), 100,000 MW of additional power generation will be required during the 12th Plan from 2012-2017 to meet the growing power demand if the economy is to grow at 9 per cent. Seventy per cent of this additional capacity generation is to be introduced through coal-based thermal power plants.

COAL SHORTAGE

The most serious bottleneck in power generation is the shortage of coal. As per the Planning Commission statistics, the gap between the demand and supply of coal was 35 million tonnes at the end of 2007 and it is expected to be around 83 million tonnes at the end of this year. The shortage would have been even more had all the planned coal-based power plants been commissioned o—n time.

By 2017, the coal shortage is forecast to be 200 million tonnes, says the Planning Commission. The Government has admitted that the shortage of domestic/imported coal has affected thermal power generation, and some of the blame for this can be laid at the door of the Environment Minister Jairam Ramesh, whose controversial policies have led to an immediate halt of mining activity in 2003 blocks, which had a potential capacity of over 600 million tonnes.

The Coal Ministry argues that this ban could affect power generation to the tune of 1,30,000 MW. The matter is now before a GoM on mining. This decision has put a question mark on the investments in power sector. Various study reports have estimated that India needs an investment of at least $135 billion to provide universal access of electricity to its population.

The capital goods sector — seen as an advance indicator of sorts — shrunk by over 25 per cent as companies put investment plans on hold. More than 26 power plants are reported to have gone into super critical coal stock position.

Increase in power production is vital for growth of industry and agriculture. Coal will remain the dominant fuel for the power sector, given the lower-than-expected gas production from existing fields and no new major gas discoveries. Additionally, majority of the future generation capacity additions will be coal-fired. Coal accounted for 54 per cent of total power capacity at end-April 2011 and 66 per cent of total electricity generated in the last financial year.

Coal demand has increased significantly with the commissioning of new coal-fired generation capacity. Given India's chronic power deficit, this trend is likely to continue. A meagre increase in domestic coal production, particularly due to delays in the development of captive coal blocks allocated to the power generators and delays in environmental clearances issues, has added to the demand-supply gap.

IMPORT BILL

Another adverse impact of the domestic coal shortage is the resultant higher import of coal. It is estimated that India will need foreign exchange of almost $20 billion (above Rs 1 lakh crore) every year for importing coal from 2015 onwards.

Hence, it is also in the interest of our balance of payments position and foreign exchange management that domestic coal production is enhanced and import of coal reduced. Therefore, the Government must put in all efforts to increase domestic coal production. All domestic coal mining companies must be asked to enhance their production immediately by increasing investments, enhancing productivity and use of latest technology for mining.

We may consider creating a framework for the short term to allow enhanced production by companies having captive coal blocks and allow them to sell coal through Coal India Ltd. by levying twice the royalty for this short period of five years. This would encourage conversion of domestic coal to power, thus ensuring energy value addition. Given the gloomy economic scenario, India will have to take urgent steps so that our basic industry gets the necessary fillip to bring the economy back on track.

The urgent need of the hour, therefore, is an immediate and comprehensive review of country’s power and mining sector, as a whole, and coal production, in particular, at the highest level. This review must look into all aspects of coal and mining policy, including production, availability of coal for priority sectors such as power, transparent coal pricing through e-auctioning, environmental clearances, sharing of profits to local population and royalty on natural resources. The Government should also expedite policy initiatives on alternative energy sources such as solar, wind and bio-fuels.

(The author is President, Bharatiya Janata Party.)

(This article was published on August 5, 2012)
XThese are links to The Hindu Business Line suggested by Outbrain, which may or may not be relevant to the other content on this page. You can read Outbrain's privacy and cookie policy here.