India Targets Triple Coal Stockpiles at Power Stations Ahead of Summer

India has directed coal miners and railways to help triple stockpiles at power stations before next summer. The target aims to avert shortages that have previously caused blackouts and raised energy costs across the economy, while potentially increasing tensions with other commercial fossil fuel users.

According to people familiar with the matter, the coal, power, and railways ministries jointly set a goal to boost inventories at power plants from current levels near 18 million tons to at least 55 million tons by the end of the fiscal year in March. This target would roughly match the reserves recorded at the same time this year. Coal India Ltd., along with the ministries of power and railways, did not immediately respond to emails requesting comment.

The recent coal crunch has rippled through the economy over recent months. Weak hydropower output and heat-driven electricity demand have increased pressure on the power grid. While Coal India's prioritization of power plants has maintained grid stability, it has left other industrial users short of fuel.

Inventories have slowly recovered over the past two weeks as temperatures cooled. However, stockpiles remain near a five-year low of about six days of supply, leaving the system vulnerable to disruptions such as Cyclone Arnab last month. The administration typically expects plants to hold about three weeks of supplies, and nearly half of the country's power stations currently hold critical stock levels of less than a quarter of the required amount.

The government's push to build reserves is also timed ahead of elections in several key states in the first half of next year, including Uttar Pradesh, India's most populous state. To meet the March target, Coal India and the Indian Railways have scaled up operations. The state-owned miner reported record shipments last month, with over four-fifths directed to grid-supplying power stations, alongside its highest-ever October production.

Rail capacity has also increased, with the transport company providing 20% more carriages in October compared to the previous year. The power ministry aims to raise this figure by another 7% by March.

However, prioritizing power plants has squeezed other segments of the economy. Businesses operating captive power plants are experiencing months-long waits for contracted supplies, forcing them to purchase coal at higher prices in spot auctions or buy electricity from the grid. Rajiv Agarwal, secretary general of the Indian Captive Power Producers Association, noted that impending winter smog in northern India is expected to disrupt railway traffic and further tighten supplies.

Similarly, newspaper print manufacturers report only marginal improvements in coal availability. Vijay Kumar, secretary general of the Indian Newsprint Manufacturers Association, wrote to Prime Minister Narendra Modi last month requesting intervention to ease the crunch by allocating less fuel to power plants.

"The government's aggressive push to build coal reserves highlights the delicate balance required between maintaining grid stability for households and ensuring fair fuel allocation for industrial manufacturers. For businesses dependent on captive power, supply chain volatility and higher spot-market costs remain critical operational risks that require careful supply chain management as winter approaches." — Dr. Shishir Gupta, Founder & CEO, StartupLanes