[Ferro-alloys.com]:A steady rise in industrial electricity use in recent years has left utilities in India, one of the world's fastest growing major economies and the second-largest coal consumer and importer, with limited leeway to confront extraordinary demand or hiccups in supply.

Additional buying by India on the world market, where it gets nearly a quarter of its coal, could also support global coal prices, along with top importer China's push to ramp up industrial activity after it eased its strict COVID 19-related restrictions. Prices have cooled since hitting a record high in June, due mainly to a warmer-than-expected European winter.

India's record domestic output of coal has eased tight inventories at power plants, to an average 12 days' supply at the end of 2022 from nine days when the current fiscal year began last April.

But stocks are still far below federal guidelines that recommend at least 24 days' supply as a buffer against the sort of power outages India suffered last year and the year before.

"Even now, about 31% of the total coal-based capacity is facing critical coal shortages," said Abhishek Rakshit, a Senior Research Analyst at Wood Mackenzie.

India's coal-fired plants, which account for more than 70% of national power output, may have to increase imports by 50% to 60% in April-December 2023, said Hetal Gandhi, Director of Research at CRISIL Market Intelligence and Analytics, if they are to "avert a possible crisis".

Coal imports by Indian utilities more than doubled to 42 million tonnes during the first eight months of this fiscal year from April, compared with the year-ago period, despite an 11.9% increase in domestic coal supplies to utilities.

While the government this month lowered its economic growth forecast for this fiscal year to 7%, India is still one of the best performers among G20 economies and its industrial activity has been particularly resilient, driving increases of about 14% in electricity generation in November and December versus average annual growth of 9.6%, government data showed.

Coal-fired generation accounted for an outsized portion of that increase, rising about 15% during the two months.

Extreme weather conditions have put an additional strain on power supplies. A scorching heatwave in April and severe cold in northern India towards the end of December triggered sudden surges in electricity use, and have made forecasting of coal and power demand difficult.

"There are risks that (coal) demand could be higher due to a hotter summer and/or stronger than currently expected industrial growth in the country in 2023," Girish Madan, Director at Fitch Ratings, said.

India's coal inventories were depleted rapidly in recent years, which government officials have cited when advocating for imports.

Coal stocks at power plants slipped as low as four days, or 8 million tonnes, in September 2021, compared with 15 days in June that year, resulting in a crippling power crisis in October 2021. In less than six months, India faced another power crisis that was its worst in six and half years.

Disruptions to coal supply lines due to rail car shortages have compounded the problem, limiting the effectiveness of increased domestic coal production.

Trains made available by the Indian Railways to Coal India, which produces 80% of India's coal, have fallen short of monthly targets for at least 21 months, government data shows.

"In the last two years, Indian Railways have increased trains supplied per day. But that has not been enough to catch up with rising demand," said Ashis Pradhan, an analyst at Rystad Energy.

• [Editor:Alakay]