 Hello and welcome to NewsClick. Today we have with us Prabir Purkasta and we are going to discuss a looming electricity shortage before the festival season. Prabir, the Indian government has said, the Minister of Power in fact has said that six months of shortages of coal, does this mean that we're going to have a sort of dark, Diwali, dark, the shader? Well, of course the crisis which is supposed to be hitting us is right now. And what they're saying is that it could be that it may hit our economic uptick which they were planning with the economy normalizing post the second wave of the COVID-19 pandemic. All of that could be affected if there is obviously a shortage of electricity. And as we know in India, the festival season is a time when you get a shortage of electricity because you get a short time spurt of electricity usage. In Durgapuja in Bengal of course is a big festival burner of electricity because you use it all over the pandas. So yes, the festival season but more importantly, if there is a shortage of coal as the minister has said, the minister of power has said that there is the possibility of India's industrial uptick, growth, GDP coming back to normal, all of this could be affected. That is a serious news indeed if it is happening. And the figures that the ministry of power is given, not the coal ministry, is that you have only four days of stock in the power plants and you could therefore be running from head to hand to mouth. And India cannot buy coal at the moment because the coal prices are very high. So this is supposedly the scenario. The coal ministry or the coal India do not seem to be agreeing so much. They have blamed the power plants and the power ministry saying that they had said they should be 22 days of coal stock. They should stock up before the monsoons. That has not happened and therefore there is this artificial shortage because the stocks have not been created. Also we know that during the monsoons there is of course a drop of coal based electrical power because we tend to use run of the water hydro power in that season because there is already surplus water that is there and you can't store it if reservoir is a full. You have to let that water go down through your turbines if you will and generate electricity which is therefore at that point free. So you do ramp down your coal fired plants and then bring them up again when the running water for the of the monsoons is not there. This time there has been a double problem that the brains have continued longer than the normally do and there have been flooding in the coal areas and that has also impeded the production of coal and therefore the ability to bounce back after the monsoons are over. So that is the other problem but according the coal ministry this was because they had warned that before the monsoon itself coal plants should stock up and they didn't. So combination of one hand of the government not knowing what the other one was doing and the typical of this government that instead of looking after the problems in a holistic way trying to solve problems and believing that somehow the god of the market will take care of all their coordination for them that is not happening. What's also surprising two letters one on 6 February 1 on 24th written by coal India to the an advisor in the power ministry saying that look we are going to have these shortages the shortages will not be normal and they will also be exacerbated by the uptick in demand etc. So the power producers still seem to have preferred to use up their stock. What could explain this and why is importing not an option? Well as we said the power plants don't want to keep extra stock because it is also reserve stock mint also money you're blocking up money you buy coal you pay okay and therefore whatever you keep as inventory of coal is money that could be in your bank okay. So therefore this is something which capitalism in general and let's face it are in increasingly we've moved away to private power production and also we have asked all the public sector undertakings including the government ones to behave like private companies. So one of the things that all companies do is to reduce inventory this is called just-in-time production the Japanese model. So once you do it for the power plants now you have a problem the just-in-time production may mean that okay you don't produce for some time and you don't supply the market somebody else supplies who has the necessary supplies the inventory but when it comes to energy now that's not an option because you shut down you're shutting down other industries it is it's a cascading effect of a shortage of power is of course on the festivals as you said dark Diwali or a dark the Shara but also on the industry also in offices also in markets. So this is that's why these these sectors of the economy are essentially infrastructure which supply things to other sectors and therefore they need to keep running and power has been energy power plants have been always held to be the most critical infrastructure even ahead of telecommunication which of course since now we are on the internet or Netflix and the other such things we will not believe that that's the most critical infrastructure but as it shows that if you have power cards starting again it does not happen for quite some time if it starts happening all over again say in Delhi this will be something which will bring us back to the idea what is critical infrastructure so yes this government making everybody behave as if there is a market economy which will regulate power is I think the bigger problem because power plants infrastructure does not operate in the same way as do other industries do markets don't operate when it comes to infrastructure there is there are other issues over here which I'm not going into today but basically the lack of coal now in the power plants brings out that just in time production models don't work in the electricity sector for obvious reasons secondly that if you do not plan for storage then how do you meet sudden shortfalls that you can get in supplies and sudden spikes that you get in consumption which of course the festival season but we are going to also see the economy constrained by lack of power electricity if we don't solve the coal problem and what you are saying or what the minister is saying is or the coal India is saying this is going to last another five six months this is what we are being said that's an optimistic view hopefully the coal mines will be able to improve their production it will be able to supply but the big issue that you have raised is the fact that we cannot meet a shortfall by quick imports of coal and that's because coal today is selling at three times the price what it was selling last year so if we do that then we have to also consider increasing the price of electricity and that at the moment means it's also going to lead to a shortfall then of supply because people are not going to be able to pay the power plants will not be able to increase the electricity costs in the same way as their coal cost will increase so they would prefer to cut back supplies unless they can increase the increase the cost of electricity now if there is a shortage of electricity then everybody would like to increase what is called the spot price immediately what you can generate so what will happen is distributors will say this too expensive for us will prefer to do power cuts rather than buy electricity at a cost which bankrupts us already distribution is the bottle like in the Indian electricity sector huge losses mounting losses because while the producers private producers NTPC can increase their costs and the central government supports that the state governments cannot pass it on to the consumers they face elections so therefore they cannot pass it on to consumers so we already have losses in the distribution sector large losses in the distribution sector this will only make it much worse so I think what we are seeing therefore is both at the distribution end and at the production end if we don't have coal if we're not able to solve the problem of shortfall of coal we are going to have that as a problem and in winters we know the sun doesn't really shine as much as it does in summer so a non-conventional solar is not going to meet that short shortfall and we have to see how much of wind energy then we get at this point of time non-conventional though it is a big chunk of water electricity in installed capacity is does not produce that much of electricity because as we know non-conventional energy the what is called the plant load factors are very low you don't have 12 hours 14 hours you don't really get sunlight to drive your power generation wind comes and goes so unlike a coal fired plant where you have a plant load factor about 70% or so the you have or you can even go higher if when it comes to solar and wind they're really in the range of 10 15% so you're not really going to see the kind of power coming out of your installed installed non-conventional energy as you have to you will see out of coal fired plants or your hydro of course you are lucky it's good rains so your reservoirs are full so but how much can it tide over this problem not really so we'll have to see that how do you manage it your only solution still is getting the coal India and other coal plants to produce more coal there are actually reports of a 15% uptake in the production of coal by CIL but that's very recent could that explain why the government is asking for six months five to six months because they don't expect that coal to be transported yes I think that there was earlier because of the flooding and all the other transportation problems is a consequence there is a also a temporary shortage so temporary shortage which can be met by just immediately increasing production back to the levels before monsoons and being able to transport it but the shortfall which is all the plants which are importing coal for instance moon which is shut down Tata's also have an ultra mega power project which they were importing coal from Indonesia there were coastal plants or other plants which were using imported coal that is the one which is going to take the main hit because we cannot get imported coal at prices which we can then sell to the Indian consumer a b we cannot substitute that imported coal readily with Indian coal because the power plants the boilers take a particular kind of coal they have been designed for that there is a range but the Indian coal and the Indonesian coal have very different characteristic you cannot burn Indian coal readily in a Bundra power plant for instance without changing major making major changes in the boiler burning systems and so on so it's not an easy task to get the boilers which have been designed for imported coal to switch over to an Indian coal so that's that problem will stay it is that certain plants which are shut down because of cost of imported coal they will not be able to start up that easily or if they do they will still run at part loads they won't run at full load so those are the problems that we have but you know central problem that we see in the Indian power sector that this is classic example of that not that you don't recognize power is essentially infrastructure electricity generation is infrastructure and it has to be planned for the long term it is not the market which can drive an electricity sector as somebody has said electricity obeys the laws of physics it does not obey the laws of the market and that is something the Indian planners have not recognized they believe market will solve all your problems another example how markets do not solve certain problems and certainly the infrastructure problems and the electricity sector are not amenable to spot prices going up and down and therefore fixing how much generation will come up or will not I think this is the classic example of that what would explain why the companies prefer to use up their stock their stockpile coal rather than follow the government's order of you know stocking the 22 days are required to and planning in advance this is what the electricity minister is saying okay power minister is saying this is is that what the coal ministry is saying we have no report from the coal ministry on this okay so why did this happen the power ministry has to answer why is it that they used up coal and why is it they did not stock up coal when coal India had warned them of this that is the question to be asked of the power ministry I am as confused about it as you are but what my answer to that was what I said right in the beginning that for a power plant and the power ministry's power plants as well what is in the public sector like NDPC and so on not stocking means higher profits so if you want the private power plants to follow the market which you do they will do any in any case and you want the public sector also to follow the market as you say they should then this is the logical answer why should I keep dead stock which means I am losing money by and I put money instead of putting money into the bank or for other things I am going to put it essentially as dead stock so reducing inventory is what all capitalist enterprises do because capital that is dead capital okay so therefore they I understand the logic of the market which is what you want them to do that is exactly what they have done now you are telling them why did you do this so individually each of them will reduce stock collectively they will increase stock only if there is something which forces them to do so otherwise it's not in their interest to keep dead stock all right Praveer thanks a lot for joining us thank you for joining us do keep watching NewsClick