InvestorQ : Why is there a sudden energy crisis in India and which stocks are going to be impacted?
divya Sing made post

Why is there a sudden energy crisis in India and which stocks are going to be impacted?

tanvi Patel answered.
2 years ago
There are numerous reports about an ongoing energy crisis in India, where states are reporting a shortage of coal which can lead to rolling blackouts. Around 135 power plants in India solely depend on coal to generate electricity, and 70% of Indian electricity demand is fulfilled through the use of coal. However, in October, there were reports that India was left with four days of coal in total to keep the electricity demand in check.

Now, having crossed more than a week of October, the power plants are on high alert, with the coal stocks nearing exhaustion which can likely affect the general public. According to CEA (Central Electricity Authority), 75 power plants are left with five days of coal stock, 65 with two days, and 17 power plants have no coal stocks currently.

The critical shortage started with the country’s push towards reaching the pre-pandemic levels of industrial activity, leading to a considerable increase in electricity demand. The demand was not met well after the heavy monsoon flooded numerous coal mines in India, severely affecting the overall coal output in various Indian states. Furthermore, the largest producer of coal, Coal India Limited, announced its inefficiency in producing the expected levels of coal, worsening the shortage to a critical level.

Indian authorities are fearing the likely increase in the electricity demand owing to the coming festival season. If the reports of the shortages are true, India has two choices to meet the future demand: they have to buy the available local supply of coal by paying a high premium over and above the current coal prices in the auctions, or import coal at a seaborn market which is witnessing a 40% hike in coal prices.

RK Singh, the Indian Power Minister, has maintained his stance throughout by referring to the reports of the energy crisis as baseless. According to him, India is still fully equipped to meet the electricity demand, even if the demand rises further. With contrasting scenarios, it remains to be seen if India will have to tackle the situation or meet the demand effectively.
Amid the speculation, energy stocks are witnessing a strong rally as investors are optimistic about a crisis resolution soon. Until now, the shares of the Indian Energy Exchange have zoomed more than 15% to Rs 805, Tata Power 14% to reach Rs 223, and Torrent Power around 4% to reach Rs 220. The rally in energy stocks is expected to continue until there is more clarity regarding the energy crisis in India.