Why is India facing a power crisis despite having the 5th largest Coal reserves in the World? thumbnail

Why is India facing a power crisis despite having the 5th largest Coal reserves in the World?

India is facing a looming power crisis as the country wilts under an intense heat wave despite high coal production in india power plants in india are facing a shortage coal is the real backbone of india's energy needs more than 70 percent of india's power supply actually comes from coal in different forms the.

Shortage has caused outages lasting hours in multiple states power plants are struggling to keep up with the increased power demand as the use of air conditioning and fans skyrockets hi everybody india is facing one of the worst power crisis in its history and the scariest point is that this power crisis is not something that happens.

Rarely but has been haunting india almost every single year for the past 10 years now as a result businesses all across the country are facing lacks and even crews of losses due to power shortages and at the macro level the economy of india itself is taking a hit now when we say power crisis you might think that maybe india does not have.

Enough energy sources right but the fun fact is that india has the fifth largest coal reserve in the world with 9.5 percent of the entire world's coal reserve right here in our country itself we have so much gold that with the existing energy demand these reserves can power india for 111 years so the question is in spite of being one of the.

Largest cold reserve in the world why is india facing a power crisis what are the factors that are causing this to happen every single year and most importantly as investors what are the study materials to help you understand the power crisis and its impact on the indian markets this video is brought to you by coco fm.

But more on this at the end of the video the first thing we need to understand is the power value chain in india and how energy actually comes from the coal mines to your laptop this value chain includes four major steps power generation electricity transmission electricity distribution.

And finally trading the value chain starts with the energy producers who mine and refine fuels that are used in electricity production this includes all types of energy sources like coal gas oil or even nuclear based fuels the fuels are then delivered to the generation facilities where the electricity generator uses the.

Fuel to drive a generator to produce electricity and then to dispatch it to a transmission and distribution system or tnd system this system distributes the electricity to consumer locations through a transmission and distribution grid and from here onwards it is transported by energy exchanges or other electronic trading platforms over an.

Extensive network to regional suppliers and from there to private public and industrial consumers now in case of coal coal india is almost a monopoly company that is owned by the government of india and this company extracts coal and supplies it to power generation companies in this case these companies are thermal power plant companies like.

Tata power and adani power then we have electricity transmission companies wherein we have both government and private players like power grid corporation of india which is responsible for interstate transmission of electricity and adani transmission which is a private player then we have distribution companies.

Which is the highlight of our discussion today so pay very close attention to this these companies are called discounts which is short form for distribution companies these are usually government owned companies that are responsible for distributing electricity to different segments of the country and to a large extent even trading is taken.

Care of by the discoms and smaller trading companies in simple words they get electricity at cheaper cost and are supposed to sell it at higher cost eventually to make a profit these companies supply or sell electricity to 5 types of consumers which are agricultural users industrial users commercial domestic and miscellaneous.

Consumers and this is where the problem comes in you see this money control pro article they summed up the power crisis problem of india very well they stated that it's not a power crisis but a payment crisis that is causing a power crisis to tell you about it a peculiar thing that you will note in this supply chain.

Is that coal india as in the resource supplier is extremely profitable because it's obviously a monopoly then we have electricity generators like adani and tata power which are again extremely profitable and eventually the consumer also gets electricity at an affordable rate but this segment of discounts they are.

Suffering massive losses of tens of thousands of crores every single year and if you look at the data you will see that these discom companies have incurred thousands of crores of losses consecutively in fy 17 they incur a loss of 33 894 crores then fi 18 they incurred a loss of 27 000 crores in fi 19 this losses amounted to forty nine.

Thousand six twenty three crores and finally in fi twenty they incur loss of thirty two thousand eight ninety eight crores and when these discount companies suffer losses what happens they are not able to pay the power generation companies on time and then when power generation companies both government and private do not get their payment they.

Are not able to place their orders from coal india as a result they face shortage in inventory eventually they end up producing lesser power than demand therefore this discom is where the root cause the problem rise so the question is why are these government run distribution companies in losses.

To put that straight there are three major inefficiencies that are directly responsible for the losses of the discounts the first problem is atnc losses or aggregate technical and commercial losses in simple words when electricity is to be distributed from one place to the other there is a significant amount of power that goes.

Waste in this case this happens in three ways number one is theft of electricity wherein people often have illegal connections for their street food stalls farms or sometimes even industries then we have commercial losses which are caused due to inefficient pilling and failure to collect pending payments from industries and lastly it is the.

Inefficient infrastructure that causes energy losses during transmission and what is extremely disturbing is that while countries in the uk and even us have 18c losses of six to seven percent in india it's close to 20 so literally one fifth of the entire power that we generate is going waste for which these garment owned companies.

Are incurring thousands of crews of losses and this brings me to the second problem which is inefficient and outdated metering system and for this the garment is actually planned to replace 25 crore conventional meters with smart meters and guess what this is such a big problem that with the installation of just 11 lakh smart.

Meters it resulted into an aggregated revenue increase of 264 crores so you can imagine if 11 lakh meters can give you 264 crores of extra revenue if 25 crore meters are replaced how much money can be collected but unfortunately as of now these are nothing but piling up losses in the balance sheet then we have the third disaster in the making which.

Are reckless cross subsidies for those who don't know cross subsidies basically mean that you supply power to different users at different prices for both benefit and profit so let's take a simple case to actually understand this let's say there are 100 consumers of power 20 are farmers 10 are industrial users 30 are commercial users and 40 are.

Domestic users now discounts will supply power to each type of user at a different cost so if discoms incur a cost of 4 rupees per unit then for farmers they will sell it at 1 rupee per unit and incur a loss of 3 rupees for industries they will sell at 2 rupees per unit to 5 industries that the government wants to promote and.

Incur a loss of 2 rupees per unit then for the non-subsidized industries which are well established the government will sell it at 6 rupees per unit and make a profit of 2 rupees per unit for domestic users they will sell it at 6 rupees per unit and make a profit of 2 rupees and lastly for commercial players they will sell it at 6 rupees per unit and make a.

Profit of 2 rupees so if you see certain users have been given subsidies while certain users have been charged more and this is done so that certain sectors are promoted and at the same time profitability is maintained but this calculation is extremely complex so if your subsidized users are very large number or if they end up consuming way.

More electricity than you estimated then you are going to incur very heavy losses and at the same time if your richer users end up consuming less electricity than you expected then your profits are going to go down and at the same time as a government if you increase the cost for subsidised players since they are very large in number you might lose.

Votes so in all the entire cross subsidizing is not driven by important factors like requirement and profit but with vote bank creation and direction-less distribution in fact this requires cutting-edge data science solution which can actually help you drive sustainable growth without incurring such heavy losses.

But unfortunately the existing discoms are far far behind all this and then we have other problems like inefficient tariff setting processes expensive thermal power purchase agreements and a lack of modern technology and a proper infrastructure to distribute power as a result our discoms are incurring tens of thousands.

Of crores of losses every single year and if you look at this money control pro infographic you will see that discoms owe 1.1 lakh crore to power generation companies that are both government and private companies and subsequently power generation companies owe 12 300 crores to coal india so what happens every year is that.

Thermal power plant companies lose track of their inventory because they have lost cash flow and they're not able to place orders with coal india this leads to supply shortages and at the end of the day when power demand spikes it causes power crisis in india almost every single year this is the reason why you will see that.

A common line in all these articles describing power crisis emphasizes on inventory shortages of coal at thermal power plants and lastly we have the logistics problem wherein the railways of india has not been able to supply enough goods trade to actually transport coal in demand so now they have cancelled passenger trains just to.

Supply coal this is the story of india's power crisis and this brings me to the most important part of the episode and that are the study materials to help you understand the power crisis problem of india and its impact on the indian economy before we move on i want to thank our.

Partners kuku fm for supporting our content if you are someone who wants to learn business in your own regional language then i would highly recommend you to listen to the books on cuckoo fm app coco fm is india's leading vernacular audio learning platform with over 1 000 plus hours of content library with over.

4.5 plus rating and a huge library of non-fiction content my recent favorite book summaries on their platform are start with why and the act of negotiation if these kind of subjects intrigue you then use the code thing50 to get a 50 discount on the koku fm subscription this is applicable only for the first.

Thousand people so go ahead use the link in the description and download the coco fmf from the link in the description moving on the first thing i'm attaching is this money control pro article that talks about the payment crisis problem that actually caused power crisis in india the second material that i'm attaching comes from the energy and.

Research institute which discusses in depth as to how could india actually solve the power crisis problem and lastly we have a niti ayog report on turning around the power distribution sector in india and this has got indicate details about the power sector and every single problem that needs to be addressed in india so do have a look.

At it and let me know what you think about in the comments section that's all from my side of today guys if you learned something valuable please make sure that the like button in order to make youtuber happy and for more such insightful business and political case studies please subscribe to our channel thank you so much for watching i will.

See you in the next one bye bye

Leave a Comment

Your email address will not be published.