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Coal shortage Crisis- Could bring Global Recession | Reason behind Blackouts in India & China

coal shortage crisis

We have seen Power Cuts in recent days in our city. What do you think why is that happening? 

The reason behind these Power Cuts or blackouts is Coal shortage in India. All the power plants, which runs on Coal are having coal stock issues.

Delhi’s chief minister, Arvind Kejriwal, wrote to the prime minister, Narendra Modi, that the capital “could face a blackout” if power stations did not receive more coal.

States including Rajasthan, Jharkhand and Bihar have been experiencing power cuts lasting up to 14 hours.

The coal shortage is threatening the global economic recovery. Blackouts could spread from China and India to all the emerging economies still mostly reliant on coal. As supply can’t be ramped up in the near term, the shortages could worsen as energy demand rises with winter’s arrivalThat may trigger another emerging-market crisis.

Coal consumption of India and China

Total coal consumption of India is around 966 MT. with the largest share being thermal coal (including lignite) for electricity generation (700 Mt), followed by thermal coal for non-power applications (245 Mt).In coal consumption India is second after China. Total coal consumption of China was 3948 MT while production was 3827 MT.

In last year, India imports 215 MT coal from Indonesia, Russia and others.

Why India is facing Coal Shortage?

After corona virus hit in the first months of 2021 Energy demand rises upto 13% in india. Due to this sudden spike in energy demand coal india has increased its production to overcome this demand. But in monsoon season many coal mines hit by rain. That leads to shutdown production and Increased logistic cost. Although Coal India Ltd. Has increased the production of coal on domestic level, Rising prices of imported coal creating difficulties to indian firms to run their Operation.

Coal is the primary fuel powering source in india which generate 70% of india’s energy consumption. As coal india increases production but still there is a need to increase import of coal. The coal shortage is happening because of increased coal prices, So import have become very difficult.

Why china is facing Coal shortage?

China produces 13% of total coal production in the world. China produces 90-95 5 of its total coal consumption domestically. But due to Rain hit in the most of the coal mines its production halted for many days. And that leads into coal shortage in China too.

China, the biggest consumer of coal, is facing a severe shortage, with many reports suggesting that the country has impose restriction on power use in homes and shops.

China is also the biggest producer of coal. With its large-scale domestic industries facing a power crisis, China has effectively put restrictions on the export of coal and is competing for imported coal in the international market.

Why Coal prices are increasing very high?

Coal prices jumps over 100% in international market. In one year coal prices crosses from 89 USD/T to 240 USD/T. This is because of high demand from across the globe and low production. In recent months Rain has become the major culprit in production cuts in many coal mines.

China looses its domestic production so china immediately stop exporting coal to other countries and fighting for import coal from Australia. This has become major reason of increasing coal prices in global market because of china;s coal shortage. The 2 major coal consumption countries are having Crises in fulfilling demand which led the coal prices higher then 100%.

The impact of coal shortage is not only on Electricity sectors, It also impact on Manufacturing sectors also. Because these plants are working on electricity.

What is the current situation of coal stocks in thermal power plants?

According to the Central Electricity authority (CEA), 16 of India’s 135 coal-fired power plants had zero coal stocks as of September 29. Over 80 per cent of the plants had less than a week’s stock left, while over half of them had stocks that would last fewer than three days.

India imports around 300 million tones of coal, primarily from Indonesia, Australia and South Africa. Coal India produces over 600 million tones of coal for domestic consumption. Now, with a domestic crunch, India’s reliance on Indonesia for coal import has increased.

Could Coal Crisis in India and China bring Global Recession

The Blackouts can go beyond China and India’s Territory. If coal shortage is continued it will decreases production in Manufacturing Units which are running on electricity. China is the Major contributor in small scale products which are manufactured in china and if any shutdown happen in these manufacturing units, it leads to decrease in global supplies.

The 2.5 billion people among 8 billons affected due to Coal crises then it could spread over other countries. China have also seen Debt crisis in Infra sectors like “Evergrandes Debt crisis”.

So Coal shortage and Debt Crisis in Infra sectors could be the possible reasons in near future global recession.

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