Coal is one of the most important resources of Electricity and energy in India. The coal industry has been one of the most preferred modes of electricity for many years. The Industry accounts for almost 70% of electricity generation in India. India has made a lot of progress into renewable sources of energy and that too has been possible due to the major conglomerates of the Indian domain mainly Reliance and Adani. The Coal Industry has always been dominant due to the cheap rates and high amount of generation. However the only problem is the high amount of pollution caused into the entire procedure of Coal extraction to Electricity generation.
In India the leader of the Coal industry is Coal India. The company has been the leader since its inception due to the heavy amount of mining carried out at many sites. The Coal rates dropped in March 2020 due to the COVID Crisis. The entire industry struggled due to the same and dropped industrial production and a blockage in the economy. The coal plants have been a blessing in India for a long time. Due to the government’s delayed procedure of pollution control inside the coal industry the companies have been continuously increasing production, making India the third largest pollution emission country currently.
To tackle the pollution problems the government has been constantly upgrading its strategies and providing subsidies for the companies. In the current situation the Reliance and Adani conglomerates have advanced in the green energy generation segment. However the government has yet not achieved any progress in making India free from the Coal driven energy production. The industry still dominates with close to 70% stake in energy generation in India.
The Coal Crisis
The current situation is worse for the entire world. The Indian government is not the only victim of the same. The Chinese government was the first major victim to the same. The coal crisis was initiated from China just like the coronavirus. The first crisis was noted one week back in China during the Evergrande Defaulting case. The Chinese government was under tremendous pressure due to the possible defaults from the biggest developer in the country. On the other hand the government was also facing a power shortage. This was also the reason why the Chinese government had shut down the operations in domestic markets for more than 3 days.
The same situation has arrived in India. There have been multiple companies who have registered complaints for the coal shortage and possible crisis ahead. One of them was Tata Power. However the Power minister said that there is no such issue and India has a surplus of 4 forward days for Coal Usage. Also India replenishes its coal stock everyday. Hence the shortage is not possible due to the same. On the other hand there is news that the power companies are shutting down their operations due to the coal shortage and this has caused a wave of tension among the entire India.
However intense the situation is, the market seems to be unaffected by the same. The Chinese markets on the energy crisis issue fell by more than 2%. However in the current situation the Indian markets have been booming without any failure.
Indian Markets and Current Situation
The Markets have been achieving new heights everyday. The rally today showed a growth of 1% again. Nifty50 Crossed all time high and went above 18000 for the first time in history. This jump was the quickest this year. The Nifty50 jumped more than 140% this year from this year’s low.
If the situation turns out true and the coal crisis arrives in India it would be a big blow for the Indian markets. The government won’t be able to cope up with the energy demand. This would not only affect the government but also the economy of India. The business sectors would be affected all over due to this situation. The government has just come out of the mighty hit of COVID and right now if the coal crisis sticks in, then there would be a great possibility of heavy profit booking in the markets.
The current situation is already very tense given the never ending bull run of the government. Amidst this situation every trader and investor is worried about a major fall. There has not been any correction in this bull run so far. Hence any reason for panic can cause a strong rise in value erosion of all stocks. Also all the indexes are close to their all time highs and this can be a big flaw as well if the profit booking kicks in.
There were also certain occasions in the previous week where FII and DII both were on the ceiling side of the market. This caused the market to go down till 17500 levels but they rebounded again quickly and crossed 18000 Levels. Hence the Coal crisis can be an issue of big concern in the upcoming days for every trader and investor.