Coal Supplies to reach Critical Levels

September 5, 2014

The Modi government has completed a successful first 100 days. The success rests on the widely catching and an instant hit- Pradhan Mantri Jan Dhan Yojana, which will take banking to grassroots level. The step saw a tremendous response from the masses across the country. Also, the relative easing of fuel prices brought a big smile on many Indians who had not seen any respite on this front during both the tenures of UPA government. Another feather which blossomed in NDA’s cap is the new upwards revision in the GDP which showed a remarkable 5.7%, the highest which the country saw in the last many months.
The government which came to power with a massive majority has been facing equally tough challenges both on the home and international fronts. The recent problem of a possibility of a massive blackout due to lack of coal supplies to more than half of the power stations in India, has an unprecedented dimension to be tackled. India which about 62 billion tonnes of coal reserves which is optimally used can easily manage the capacity of power plants. The issue at stake is not the reserves but a price mismatch between the regulated price at which the coal is sold to these plants and the cost of production.
The power generators are caught in heavy debt as they have been increasing demand of coal without the capacity to purchase even the existing supply. This if not checked in time may lead to a major blackout across the nation. 56 power plants out of 100 which handle three-fifths of the country’s power supply will be dysfunctional within a week as they have less than a week’s reserves.
This could act as a dark cloud on the growth model which Modi had shown to his Japanese counterpart and the Japanese investors on his first visit to the island nation early this week. Modi had overcome similar situation in Gujarat when he was the CM and his efforts had made the state as a power surplus state. The same model will have issues if it had to be replicated on a national level, merely because the responsibility of power is shared between the Centre and the states. Also, the scale of the problem is huge as the industry has mounted up bank debts of 5 trillion rupees ($84 billion), according to central bank figures.

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