India’s energy crunch: Power Minister says no coal shortage; fuel prices rise across board

Petrol and diesel prices climbed to record high levels as oil marketing companies hiked the price of petrol to Rs 102.94 in Delhi and diesel to Rs 91.42.

The price of liquefied petroleum gas was also hiked by Rs 15 per cylinder on Wednesday. A cylinder in Delhi now costs Rs 899.50. Moreover, Mumbai’s Mahanagar Gas has hiked the prices of CNG and PNG by Rs 2 in the region.

Power Minister RK Singh has said India’s coal production has seen pick up and the power crunch is easing. In an interview with CNBC-TV18, Singh also said there is enough stock to meet peak demand.

“We get coal every day from coal mines. In between, there was some difficulty because of continuous rains in coal-producing areas, so mining had become difficult. Now, the production has picked up again, so we are okay,” Singh said. These statements came a day after the ministry allowed captive mines or the mines that produce coal solely for their own use to sell half of their output in the open market.

He also said there is no shortage of power and that states can buy as much power as they want, they just have to pay for it. “The shortage is not because of lack of regeneration,” he said, “they are probably not able to buy power because they don’t have money. Or there may be some distribution glitches. But no lack of power.”

​Higher fuel prices and coal shortage can risk fanning inflation and slowdown India’s economic growth, a Bloomberg report said Wednesday. Coal shortage spells industry closures and higher imports at a time when crude oil prices are at a seven-year high.

Oil and Natural Gas Corporation (ONGC), state-owned oil and natural gas company, surged over 2 percent today whereas metals declined, with Nifty Metal slipping nearly 3 percent. Metals are pressured by the energy crisis in India and China, and a surge in the US dollar. The crunches continue to weigh on manufacturing, smelters, and downstream companies. Also, the Evergrande concerns continue to cast a shadow.

While sliding metal prices are justified, experts say the movement in energy stocks is not. Kotak Institutional Equities said there is no fundamental change for regulated utilities and downstream oil firms. Even companies that benefit from higher energy prices in short term face an existential threat from renewable energy players unless they can turn around their business models, it said.

Chemical industry stocks are also benefitting from global power crunch, Thirumalai Chemicals said Wednesday. The company’s stock is up over 200 percent this year.