As coal stocks shrink, India faces growing energy shortage crisis

About 70% of the nation’s electricity, dwindle to the lowest in years just as power demand is set to surge.

Coal-fired power stations have an average of four days’ worth of stock of the fuel, according to the latest data, and more than half the plants are already on alert for outages. Power Minister Raj Kumar Singh has warned that the nation could be handling a supply squeeze for as long as six months.

Power shortages are already emerging, and the gap between available electricity supply and peak demand widened to more than 4 gigawatts on Monday, according to government data from power ministry.

While shortages of coal in China, and that nation’s power crunch, have commanded most attention, it’s India that’s facing a potentially worsening scenario.

Industrial and domestic consumption usually hits peak levels as India enters a festival season from later in October and that could risk stalling a rebound in Asia’s third-biggest economy, which has been recovering from an unprecedented 7.3% contraction in the fiscal year ended in March.

Coal production has been hit by severe flooding in India’s eastern and central states during the typical monsoon season, with mines and key logistics routes impacted. Any recovery will hinge on the weather — rains need to stop to allow mines to ramp up operations and for coal trucks to resume deliveries.

On Tuesday the government said it will allow companies that have been allotted coal and lignite mines for their own use to sell 50% of their annual output in a bid to ease shortages.

While coal stockpiles at power plants are perilously low, it remains unlikely the operations will completely run out of fuel. Government ministries and industry are working to closely monitor stocks, and could move again to divert supplies away from industrial users — like aluminum and cement makers — to prioritize power generation. That’d leave those industries faced with their own dilemma: curb output, or pay high prices for imported coal.