Coal India – which produces about 80 per cent of coal mined in India – has confirmed growing mountains of coal stockpiled at mines and power stations has led to several mines temporarily halting production.
Last Friday the Economic Times reported 84 million tonnes of coal stockpiled comprising 48 million tonnes of it at Coal India mines and another 36 million tonnes at power plants.
The stockpiles are now so large they are approaching one sixth of annual production, even as CIL seeks to commission more mines every month.
Massive stockpiles leading to mines being shut was obviously big news with the potential to affect labour and communities both dependent on and affected by the company's massive coal mines. It was also obviously an issue which could have a significant impact on the stock price of the part-privatised Coal India.
However, Coal India said nothing. The Bombay Stock Exchange demanded a clarification.
The next day Coal Secretary Anil Swarup downplayed the report though he conceded that at some mines "some production was brought down." However, "to say generally that the production has been cut down is not painting the correct picture," he insisted.
Four days after the story first broke Coal India finally issued a statement to the Bombay Stock Exchange.
While the statement – titled "rumour verification" – directly referred to the original Economic Times article, Coal India only went as far as confirming "some" of its mines "have regulated production." Beyond that there was no acknowledgement as to how many mines have stopped producing, which mines are affected or how long the closures are expected to run for.
Since coming to power in May 2015 the Modi Government has made increasing power production one of its centrepiece policies.
Central to this plan is a dramatic expansion of coal production capacity. Responding to government pressure, Coal India has set a target of increasing production to 908 million tonnes by 2020. The Ministry of Energy wanted an even more ambitious target of one billion tonnes.
The government has also touted a target of 500 million tonnes from other producers, up from the almost 100 million tonnes currently produced for captive power stations, aluminium smelters and steel mills.
To achieve this massive increase in coal production the government enthusiastically launched a de-regulatory blitz: attempting to strip tribal groups of hard-won legal and land rights, make protected forests available for mining, gut environmental laws, expedite land acquisition and approve mine expansions with negligible social or environmental assessment.
While not all of its moves have come to pass due to opposition from grassroots social movements and in parliament, the government's de-regulatory intent remains.
The government has also auctioned off swathes of land for new mines and accelerated investments in new rail capacity to cope with the expected additional volumes needing to be moved from mines to newly-commissioned power stations.
The government has also launched a draconian crackdown on dissenting voices through its attempt to shut Greenpeace India down because of its energy policy advocacy.
In the last year Coal India's production has grown by over 36 million tonnes with hundreds of millions of tonnes more annual production in the pipeline.
There is a significant hitch in Modi's electrification masterplan: power stations aren't buying much more coal.
There are several factors at play: financially crippled distribution companies (referred to as 'discoms') and a patchy economy has resulted in slowing power demand growth. The energy-intensive steel sector is, according to Swarup, contracting. On top of that, new power plants that started construction during the boom times are now being commissioned.
As a result the capacity factor – the percentage of time a plant is actually supplying power to the grid – for the thermal coal fleet is about 65 per cent. For non-government, private power producers that figure is even lower, around 58%. The lower the capacity factor, the more expensive the power is and the less income a producer generates.
The state-based distribution utilities have little appetite for expensive power as they are already groaning under mountainous and rapidly increasing debts. With limited prospect of being able to increase power prices to cover costs the discoms choose to limit their power purchases.
The government is also pinning its hopes on infrastructure spending commitments announced in its recent budget to revive the flagging coal-intensive steel and cement sectors.
By the end of February Coal India had produced 477 million tonnes this financial year with Swarup expecting the tally by the end of March to be between 535-540 million tonnes, further adding to the glut.
A glut of domestic coal is also likely to further undercut demand for more expensive thermal coal imports. For projects such as Adani's Carmichael coal mine in Australia, this would make the prospect of attracting financial support even more fanciful.
Despite the current glut, the government is pressing on with pushing ever more coal mines into production. Coal India has reportedly been given environmental approval for 22 more mines with an annual production capacity of 48 million tonnes a year. The government is also talking up the allocation of a further ten mines to other public sector agencies as a step towards diluting Coal India's near monopoly on coal production.
As the last coal plant building boom turns to bust, Indian utilities are increasingly seeking to reposition themselves as major players in renewable energy and solar power in particular.
This week Tata Power, one of the major private power developers which took big bets on coal over the last decade, flagged that it now wants to increase its role in solar as international companies – with access to cheaper international finance – are winning Indian solar tenders.
The recently announced doubling of tax on coal in India is likely to accelerate the trend towards solar. Financial analysts Nomura recently noted that for major industrial customers – who pay up to three times the average tariff charged by the publicly-owned generator NTPC – solar self-generation may be increasingly attractive.
Nomura argues that if some major industrial customers defect from the coal-centred grid, the state discoms would need to increase tariffs to cover the shortfall, making rooftop solar even more attractive for retail consumers.
In which case, India's coal glut could become far more than a temporary phenomenon.
Bob Burton is the Hobart-based Editor of CoalWire, a weekly bulletin on global coal industry developments. (You can sign up for it here.) His Twitter feed is here. Ashish Fernandes is Senior Campaigner at Greenpeace. His Twitter feed is here.