Coal crunch puts India’s factories in the dark

Indian factories, smelters and households are grappling with blackouts and escalating energy expenses as a result of dwindling coal reserves at power plants across the nation. The weakest monsoon in over a decade has curtailed hydropower generation, while abnormal heat has driven up demand for air conditioning and irrigation for agriculture. Consequently, coal-fired power plants, which generate roughly two-thirds of India’s electricity, have rapidly depleted their inventories.

Smaller factories, farmers, and households are experiencing power cuts because demand outpaces supply. In contrast, large industrial customers - including those in metals smelting, chemicals, and paper sectors - are unable to generate enough electricity for their operations due to state-owned miner Coal India Ltd. allocating deliveries primarily to grid-connected generators.

Small steel mills in the central state of Chhattisgarh are enduring outages ranging from 10 to 12 hours daily, compelling plants to cut production. Manish Dhuppad, general secretary of the Chhattisgarh Mini Steel Plant Association, explained that these plants require a "consistent power supply" and that any disruption can halt the process completely.

"For example, if we have molten metal in the furnace and power goes out just before we can extract it, the material solidifies, and we must start the melting process again," he said.

The power shortage underscores the growing impact of extreme weather on India's economy, exacerbated by a record El Niño. Additionally, it highlights how India's continued dependence on fossil fuels hinders its ability to adapt to climate change. As of October 10, feedstock supplies at nearly half of India's coal-fired plants had dwindled to less than a quarter of their required levels, according to the power ministry.

A late surge in monsoon rain in coal-mining regions of eastern India exacerbated the shortages, impacting production and rail transportation of the fuel.

In the northern state of Punjab, homes and businesses are enduring prolonged blackouts. Badish Jindal, who runs a steel wire plant in Ludhiana, an industrial city in the state, noted that frequent power cuts of three to four hours have led to higher energy costs, as his factory must switch to expensive backup generators. "The power cuts are unscheduled," he said.

"This makes it challenging to plan operations and deliveries and affects product quality. The sudden stoppage and restart of machines, as power supply fluctuates, also raises accident risks."

The country's electricity grid has faced an average daily shortfall of nearly 4 gigawatts since the start of October, enough to power roughly 2 million rural Indian households, according to Bloomberg calculations. The policy favoring grid-connected power plants has placed companies that generate their own coal-fired electricity at a disadvantage.

Rajiv Agarwal, secretary general of the Indian Captive Power Producers Association, which represents big industrial users, explained that these firms must pay high prices at Coal India auctions and buy expensive power from the grid. They are also enduring lengthy waits for rail transport, which poses challenges for those with limited operating capital, forcing some to cut output.

Coal India did not respond to a request for comment. For those relying on the grid, electricity bills have risen in most Indian states over recent years due to factors such as rising coal prices and upgrades to the national electricity network. In Uttar Pradesh, India's most populous province, some villages in Shamli district are experiencing as much as seven hours of daily blackouts, prompting many residents to purchase backup systems to power lights and fans, according to Devinder Singh, a local grain and sugarcane farmer.

A rapid expansion of solar power in recent years means Singh can irrigate his fields during the day, but issues arise after sunset. "We somehow adjust," he said. "My bigger concern is the rising cost of electricity."