This article originally appeared on the Kautilya School of Public Policy blog and can be accessed here.
The past week saw a war of narratives with Coal India Limited (CIL) at the center. While the dust has started to settle, observers are left with more questions than when the situation started being termed, rather apocalyptically, as India’s Energy Crisis. The list of potential causes included the post-lockdown surge in demand for electricity—70% of which is met through thermal power plants; the rapid rise in international coal prices due to a global demand surge, making domestic coal affordable; consistently poor investments in CIL and unsuccessful attempts to auction off coal mines. Other reasons included supply chain challenges owing to unprecedented rains in coal-supplying states that hampered mining and a general, seemingly orchestrated stagnation affecting CIL’s financial and operational efficiency.
While the government initially described the situation as tenuous, it didn’t take long before the representation of coal shortages and reported power outages were dismissed in their entirety. What are we to make of this turn of events? Did the government successfully thwart a potential crisis, or were the semantics of doom overblown from the start?
The facts on the ground present a different reality. Fuel shortages are not an isolated problem—China and much of Europe are facing similar situations, with resource supply chains unable to make as quick a turnaround as consumption following the upliftment of lockdowns. While there were, thankfully, no widespread or persistent power outages, there is no denying the writing on the wall. Dwindling global coal extraction, increasing cost parity of renewables, and an international political environment embattled by increasing climate emergencies indicate heydays for King Coal are over. For India, however, this is an unwelcome reality given that its economic growth is and will continue to remain coal-fed for the foreseeable future.
If the events of the past two weeks are any indication, CIL’s role in India’s growth story is far from over. While prudent policy directives shielded India’s renewables industry from the pandemic’s impact, existing installed capacity (100 GW) is still far from the government’s (450 GW) intended target. In such a situation, constrained by mounting international pressure to wean off of coal and cornered by commitments to continued socio-economic development, India is left with little room to wriggle a compromise.
While India’s coal-driven power supply infrastructure is at the center of international focus, its distribution-side challenges offer no sign of respite either. CIL’s financial problems are tied to dues that generation companies (GENCOS) owe, who are in turn due to receive payments from state distribution companies (DISCOMS) known for complex cross-subsidizing practices. These cross-subsidies and how state-owned DISCOMS manage electricity supply within their jurisdictions are tied to electoral aspirations.
Providing sustained and sustainable power to India’s citizens is as embroiled in service delivery politics as intractable economic and material contingencies. We know for a fact that the system has and will continue to weather sustained shocks in the form of ever-intensifying cyclones, wildfires, and landslides in addition to mounting international pressure for a zero-carbon future. In the face of persistent shocks, how long can such a volatile status quo be maintained, with incremental nudges and piecemeal solutions, remains a deeply political rather than a technical question.