India Inc likely to come out of energy crisis unscathed

The energy crisis is far from over. And the ongoing energy crisis is to be seen in the wake of the fact that at a pan-India level, over 70 per cent of power produced is via the coal route. The dependence on coal-based generation, however, varies widely between states. For instance, Telangana, Uttar Pradesh and Maharashtra have higher dependence on coal compared with the rest of India. Bihar, on its part, is vulnerable because while it meets 54 per cent of its need directly via coal-based generation, a further 18 per cent comes via short-term power purchases from other states, which would also be coal-based primarily.

The good news, amidst all these, is that India Inc, is likely to come out of this crisis unscathed, thanks to more factors than one, which include regulated coal supplies to non-power sectors, allowing participation of captive miners and increased production by the State-run coal behemoth Coal India Ltd (CIL), the largest and key supplier of coal. However, if power demand picks up significantly from its present level, a severe crisis in future cannot be ruled out altogether.

Mind you that power demand has recovered sharply, peak demand sharper in the five years through September, growth in India's monthly power demand averaged 4 per cent, though it did exceed 12 per cent in a few months of fiscal 2020. In recent past, power demand has moved up again. Base demand has clocked 13 per cent growth year-to-date. Volatility in base demand has also risen sharply over the past two years. Peak demand growth has been higher at nearly 15 per cent, while volatility has spiked here, too.

According to a recent CRISIL study, the massive increase in power demand in April-September was not distributed equally among the different sources of power. Coal-based power generation rose 19.1 per cent on-year, while generation from other conventional sources saw a 15.5 per cent on-year decline. Generation from renewable sources rose 16.7 per cent. Hydro, gas and nuclear, which typically comprise 16-17 per cent of generation, saw a steep decline due to a combination of factors. Hydro generation, which accounts for 12-13 per cent of monthly generation on average, declined 15.3 per cent on-year during April-September 2021 due to deficient and uneven monsoons.

Talking about energy demand from industry, industrial demand constitutes 30 per cent of total power consumption (excluding captives), specifically from grid-based power. Industries follow a combination of captive power plants (CPPs) or grid power.

It is pertinent to mention here that in early October, the Union Ministry of Coal had declared that coal supply to non-power sectors would be regulated. Overall stock, meanwhile, fell from 6 days as on September 15 to 4 days as on October 15, 2021. The regulated coal supplies to non-power sectors is expected to help corporate India survive the crisis. At this point, one can only hope that supply would ease by end-October or early November, when the supply regulations are expected to be moderated.