Power Cuts

October 21, 2011   ·   0 Comments

It seems to be business as usual on the stock market front. Back to tracking stocks and the global cues. But what about the domestic scenario?  Most of the country is grappling under severe . This is not summer, yet there is ‘load shedding’ or should we say forced . In Maharashtra, the power cut ranges from 2 hours to a staggering 16 hours.  The Govt of the most developed state is broke, which is why it has no money to pay and buy surplus power from neighbouring states. The Metro’s across the country are largely unaffected but across India, there is a power crisis, spurred on by the acute shortage of coal.

www.stockssavvy.comA report in Economic Times states that coal supply to power projects in southern states including Andhra Pradesh and Tamil Nadu was affected due to the Telangana agitation. Fuel supply to the eastern and northern states was disrupted due to floods in Orissa and the adjoining coal mines. Multitude of reasons – strikes, heavy rains have hurt mining, loading and transportation at mines of Northern Coalfields, Central Coalfields, Eastern Coalfields, Mahanadi Coalfields and Singareni Collieries Company. Therefore, projects that supply power to states such as Tamil Nadu, Andhra Pradesh, Chhattisgarh, Uttar Pradesh, Maharasthra, West Bengal and Madhya Pradesh are vulnerable.

These problems have only got compounded because we as such suffer from poor domestic coal production. And this is a problem which has been unleashed by the Govt due to its complete inaction, which does not come as any new news. Private sector companies are not allowed to mine and sell coal in the open market. That is the prerogative and monopoly of Coal India. Supply is not able to keep pace with the demand. And imported coal is two to three times more expensive. Coal India too sells at regulated prices, much below the international prices. This is done to keep the electricity costs down. If Coal India was allowed free pricing, our electricity prices will shoot through the roof.

Coal is the prime fuel used to generate power and currently as per Central Electricity Authority (CEA), more than half of the country’s 86 thermal power stations are currently running at “critical” stocks of less than five days, while more than a third of the plants have become “super critical”.

The immediate short term measure was that the Coal Ministry announced earmarking a part of the 4 MT coal sold through e-auction to meet shortages. But this is just a temporary relief. Demand for coal is rising at the rate of 8.4% over past five years while supply has grown by a dismal 5.4%. For FY12, Coal India has committed 331 MT of coal supply to the power sector as against the demand for 426 MT. The Govt of India has put out a report stating that when the 12th Plan Period ends in March 2012, India could face a coal shortage of 15%. Currently, India’s coal demand is estimated at 696 MT, of which only 554 MT is likely to be available thus 142 MT will need to be imported.

So what options do the power companies now have? There are only three options – they import coal or buy through the e-auction or acquire coal mines. The first option is probably the only feasible one. E-auction is meant only for small power companies and that is definitely not the category into which these power companies fall. Acquiring is no longer easier and where do they get the green bucks when they are already leveraged to the hilt? Also it has been seen that of the 100 coal mines allotted to private sector companies, only 5 to 6 have started production. Importing is thus the only option.

The relief will come, that’s for sure. But it will once again be a temporary relief. What we need is a permanent solution. Allowing entry of private sector companies to mine and sell has to be an option which the Govt needs to consider. Yes, it could mean hike in our electricity bills but come to think of it, that too is necessary for inculcating responsible usage of electricity.

Unfortunately, for all the lapses of the Govt, we will have to bear the brunt, pay a price. Inflation is already a concern and if power tariffs rise further, well, do not know what RBI will do to control the prices. This festival season will be one of its kind – hot, sweaty and terribly expensive!

When UPA came in power, they promised people that India will be free from Power problems in 2014 & India will be self sufficient till 2040. This was a big booster for the markets, Nifty rallied from 3500 to 4200.We have gone backwards rather than going forward in tacking our power problems. It would be interesting to see what Govt will have to say in their upcoming elections?

Tell us how bad the power cuts in your area?

 

Rajesh Singla

Rajesh is the founder & CEO of Stockssavvy, Stocks analyst,financial advisor by choice,software engineer by fate,biker,gamer,cricket lover n enthusiastic person. He believes in doing things not just to get by but to get Ahead...

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