Government-owned mining major Coal India Ltd warned of a fall in production, posing new threats to the country’s energy supply if the company isn’t able to raise prices, reported Bloomberg.

The world’s largest coal miner is facing cost pressures from an emerging hike in salaries and on high prices of diesel used to power mining equipment. Chairman Pramod Agrawal said some of the company units are finding it difficult to survive without a price hike.

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Increasing coal prices included in long-term supply agreements would need the backing of the government, which weighs the impact of higher rates on the inflation and the broader economy, according to the Bloomberg report.

Agrawal’s warning comes as Coal India faces government pressure to maintain fossil fuel supplies. India relies on coal for around 70% of its power generation. Coal inventories at power plants plunged last year as production fell, triggering power cuts and supply curbs.

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According to the report, coal reserves at power plants have risen from their lowest levels in September 2021, but they are still only around one-third of the highest in April 2020 and in the coming summer power demand will increase in India.

On a call with analysts, Agrawal said that a price hike should take place immediately as it has become very urgent for Coal India. Otherwise, the nation will suffer a coal shortage.

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Coal India expects to supply 670 million tonnes in the financial year 2022, which is 17% higher than the last year. For the next 12 months, the company has set a supply and production target of around 700 million tons.

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Industries are complaining of supply shortfalls as they are recharging stockpiles for electricity generators on priority. According to the Aluminium Association of India, coal reserves at power plants used by aluminium producers are at an average of three to four days, down from a normal level of 15 days.