The country seems to be in the grip of a major power crisis. While states have sought help from the central government, power supply companies are also asking customers to spend electricity wisely. So the question is why this situation has happened. What will be its impact on the country’s economy and you? Let us understand sequentially.
Why is there a power crisis: In our country, about 72 percent of the electricity demand is met through coal. After generating electricity from coal, companies supply it from industry to common people. In lieu of this, companies charge electricity bills from their customers according to the unit.
What is the real reason: There is a shortage of coal in the country. The reason for this decrease is the increase in consumption. The demand for electricity is witnessing an increase from August 2021 onwards. The electricity consumption in August 2021 was 124 Billion Units (BU) while in August 2019 (before the Covid period) the consumption was 106 BU. This is an increase of around 18-20 per cent.
Why has consumption increased? There are many reasons for the increase in consumption. The first reason is the unlock process. After the first and second wave of Corona, now the industries of the country are almost fully functioning. They are expanding. Apart from this, the government claims that under the ‘Saubhagya’ program more than 28 million households were connected to electricity and all these new consumers are buying appliances like fans, coolers, TVs etc. Due to this also the power consumption has increased. The consumption has got a boost due to the heat.
Why the sudden crisis: This crisis is not sudden. The situation is not good for the last several months. Actually, the storage of coal in India is for a limited period. The average stock of coal in power plants stood at about four days on 3 October 2021. Though it is a rolling stock, coal is sent from coal mines to thermal power plants through rakes every day.
It is also a fact that the months of August and September 2021 saw continuous rainfall in the coal-bearing areas, due to which less coal went out from the coal mines during this period. Let us tell you that India has the fourth largest coal reserves in the world. However, we are no less in terms of consumption as well. This is the reason that India is second in the world in importing coal. This is the reason why the government is emphasizing on reducing the import of coal as well. However, despite this, the import of coal continues to increase.
What is the solution: The immediate solution is to reduce coal imports and power consumption. Apart from this, the production of coal in the country will have to be increased. At the same time, there is a need to move fast towards alternative energy. However, all this is not so easy.
The impact of the current crisis on you: However, if the power supply companies of this crisis buy coal at expensive prices, then the risk of recovery may fall on the consumers. This means that electricity prices can be expensive. It may be that you have to spend more money per unit of electricity used than before.
‘Only one day’s coal is left’, then the entire Delhi’s electricity will be destroyed?
What will be the effect on the economy: The power crisis during the festive season is bad news for the country’s economy. There may be a slowdown in the economy recovering from the shock of Corona. In fact, due to the power crisis, production, supply, delivery in the industry will be affected, which is a booster dose for the economy. Its effect can be seen directly or indirectly by linking it to inflation.
What will be the effect on the government: The foreign exchange reserves of the government will be spent more due to the increase in coal imports. Since imports in India’s trade are in dollar terms, there may be a shortage in the country’s foreign exchange reserves. This is also important because after going to the record level, now there is a continuous decline in the foreign exchange reserves. At present, the country’s foreign exchange reserves are $ 637.477 billion. Decrease in foreign exchange reserves is not a good sign for the economy.
What is the central government doing? A Core Management Team (CMT) was constituted by the Ministry of Power on 27 August 2021 to manage the coal stock and ensure equitable distribution of coal. It included representatives from MoP, CEA, POSOCO, Railways and Coal India Limited (CIL). CMT is closely monitoring and managing the coal stock on daily basis. Simultaneously, it is ensuring follow-up action with Coal India and Railways to improve the supply of coal to power plants.