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Will coal shortage impact construction activities?

The country that is slowly returning to normalcy after fighting a Covid battle is faced with a new crisis – coal shortage. India being coal dependent economy with substantial portion of the electricity generated from the coal-fired thermal power stations, coal shortage will directly impact electricity generation with its cascading effect on industrial production and general life.

While despatch of coal to power sector and captive power plants (CPP) increased by 16% and 35%, respectively, it fell sharply for other sectors like Cement, Steel, Sponge Iron and other sectors like fertilizers, textile, chemicals etc as collieries prioritised fuel supply to coal-starved power plants to ensure uninterrupted electricity supply. Thus, sustained coal shortage can impact building material production and consequently affect the construction activities in the country. We enter the busy season with a sword of uncertainty created by coal shortage hanging over our head.

The overall coal production during September 2021 has significantly increased to 51.7 million tonnes (MT) as compared with 38.9 MT in September 2020 and 39.5 MT in September 2019, registering a growth of 33% year-on-year (y-o-y) and 31% when compared with September 2019 production. However, on a month-on-month (m-o-m) basis, the coal production saw a decline of around 4%. This was on account of around 4% lower production by Coal India Ltd. (CIL) and around 10% lower production by Singareni Collieries Company Limited (SCCL) in September 2021 as compared with August 2021. Production and despatch volumes of coal have been affected due to heavy rainfall in September 2021 across the mining geographies.

It should be noted that coal production generally slows down during monsoon season and an extended monsoon this September has impacted mining operations. However, India’s coal production is expected to pick up from October as monsoon recedes. Demand for coal, on the other hand, is expected to be higher than supply as rising international coal prices will likely keep tab on imports into the country. In order to achieve the annual production target and to meet the rising demand situation, the domestic coal companies, including CIL and SCCL will have to significantly ramp up the production from October 2021.

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