That coal feeling: Shortage of rail wagons is one reason for dipping power plant inventory. But problem goes further

Context: Thermal power plants in India are once again struggling with coal inventory dipping to critical levels. A similar coal crisis had surfaced in India in October last year.

Given that both coal mining and logistics through railways are dominated by GoI-owned enterprises, it reflects poorly on official management of an essential economic input.

What is the situation wrt shortage of coal in India?

On April 21, 62% of the plants had coal stock that was classified by the Central Electricity Authority as critical, inventory of less than 25% of the normative stock.

A month earlier, about 49% of plants were classified as critical.

What is the reason behind the present coal crisis?

CEA’s reports show that many plants have indicated inadequacy of railway rakes as the reason for low stock.

It’s inexplicable. Coal provides about 49% of railway freight earnings and is the key to a healthy financial performance. It’s puzzling how railways finds itself unable to anticipate the infrastructure needs of the most important item it moves.

Why the current shortage is worrisome?

What makes the current situation worrisome is that planning deficiencies at the central level have come in the backdrop of a weak financial position of state government distribution companies.

This makes it unlikely they will use imports to fill the gap as the benchmark coal Australia price has more than doubled in a year to an average of $197 per tonne in the January-March quarter.

What is the way forward?

India’s struggle with coal supply to its power plants has come about at a time when manufacturing still has spare capacity. It’s a timely wake-up call for the full chain in the power sector.

Ad hoc reforms will not work any longer.

The distribution link has to move to a more efficient pricing system while the upstream segments of the power sector are choked by mounting overdues.

And as the primary logistics provider in the sector, the railways needs to step up.

Source: This post is based on the article “That coal feeling: Shortage of rail wagons is one reason for dipping power plant inventory. But problem goes further” published in The Times of India on 24th Apr 22.

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