India risks a repeat of last summer’s power outages as soaring temperatures boost demand for coal that’s used to generate about 70% of the country’s electricity.
The hottest March in more than a century has heralded an early start to summer, increasing power consumption by air conditioners and refrigerators. While state-run miner Coal India Ltd. is producing at record levels this month, that may not be enough to replenish power plant stockpiles that dwindled to barely a third of required levels at the start of this week.
Coal India, which accounts for four out of every five tons of the fuel mined in the country, boosted its output by 27% in the first half of April from a year earlier. Still, escalating demand seems to “dwarf” that supply increase, the Kolkata-based company said in a stock exchange filing Tuesday.
The miner is prioritizing shipments to power plants, which raised electricity generation by about 6% in the same period this month. That’s leaving aluminum smelters, cement factories and steel mills facing a supply crunch for the fossil fuel. If India can’t close the shortfall, the nation will be threatened by power outages and the economy will take a hit as industrial output suffers and electricity costs rise, according to economists at Nomura.
“This could become another stagflationary shock,” Nomura economists Sonal Varma and Aurodeep Nandi wrote in a research note Tuesday.