- Logistics remain key supply challenge, rake loadings fall below target
- Lower blending requirements at plants limit imported coal receipts
India’s thermal power sector is entering the monsoon with progressively tighter coal inventories as sustained electricity demand continues to outpace domestic coal supply, forcing utilities to draw down stockpiles despite continued high dispatches from Coal India Ltd (CIL).
Data from the Central Electricity Authority (CEA) shows thermal power stations consumed around 79.9 mnt of coal during May while receiving only 75.6 mnt, resulting in an inventory drawdown of more than 4 mnt. The trend has continued through June, with national coal stocks falling by 3.51 mnt between 31 May and 23 June, reducing inventory cover from 15.9 days to 14.6 days. During the same period, the number of power stations with critical coal stocks increased from 22 to 32, highlighting growing pressure on fuel availability.
The tightening inventory position reflects weaker domestic coal production during May, continued strong coal-fired generation, and logistical bottlenecks affecting coal movement. While CIL has cushioned the market by dispatching more coal than it produced through liquidation of pithead inventories, the government has simultaneously moved to strengthen energy security by extending operations at Tata Power’s imported coal-fired Mundra power station and accelerating railway infrastructure to improve domestic coal evacuation.
Unlike the severe coal shortages experienced during 2021, however, the current market represents progressive tightening rather than a supply crisis. Domestic coal continues to meet the overwhelming majority of India’s electricity requirements, while imported coal remains a strategic balancing fuel.
Coal balance turns negative in May
India’s coal balance deteriorated during May as consumption exceeded receipts, resulting in a significant drawdown of power plant inventories.
Thermal power stations received approximately 75.6 mnt of coal during May while consuming nearly 79.9 mnt, forcing utilities to rely on accumulated stocks to maintain high levels of generation. The resulting inventory reduction of more than 4 mnt reversed much of the stock build achieved during the winter and early summer months.
The deficit is significant because May normally marks the period when utilities attempt to build inventories ahead of the monsoon, when mining and transportation become more challenging. Instead, exceptionally strong electricity demand kept coal-fired generation elevated, preventing any meaningful stock accumulation.
Although renewable generation continues to expand, coal remains the dominant source of baseload and peak power generation, underlining its central role in maintaining grid reliability during periods of high electricity demand.
Production slowdown tightens the market
The tighter coal balance reflects weaker domestic production across several major coal producers. India produced 78.13 mnt of coal during May, achieving only 85.9% of its monthly production target and recording a 9.5% y-o-y decline.
CIL, which accounts for around 80% of domestic production, produced 56.13 mnt, achieving only 84.6% of its target and posting an 11.6% decline from May 2025. Singareni Collieries Company Ltd (SCCL) also underperformed, with production declining more than 22% y-o-y.
Among CIL subsidiaries, Bharat Coking Coal Ltd recorded the weakest performance, while Northern Coalfields Ltd and several other subsidiaries also fell short of planned production, highlighting operational challenges across multiple mining regions.
CIL draws on pithead inventories
One of the most important insights emerging from the data is CIL’s ability to cushion the market by drawing down its own inventories.
Although the company produced only 56.13 mnt during May, it dispatched around 67.7 mnt, implying that more than 11 mnt of coal supplied to consumers came from pithead inventories accumulated earlier in the year.
This has effectively acted as a shock absorber for the power sector, enabling generating stations to maintain coal receipts despite weaker mine output.
However, this strategy cannot continue indefinitely. Unless production improves during the monsoon, continued liquidation of pithead inventories will gradually reduce the buffer available to support the power sector during periods of peak demand.
Power plant stocks continue to decline
CEA’s daily coal stock reports confirm that inventories have continued to tighten throughout June.
Total coal inventories across thermal power stations declined to 45.65 mnt on 23 June, down from 49.16 mnt on 31 May, representing a decline of 3.51 mnt, or 7.1%, in just over three weeks.
During the same period, average inventory cover fell from 15.9 days to 14.6 days, while stocks as a percentage of normative requirements declined from 65% to 60%.
The number of generating stations classified as having critical coal stocks also increased from 22 to 32, reflecting growing pressure at individual plants even though national inventory levels remain significantly healthier than those witnessed during the 2021 coal shortage.
Several large generating stations, including Panipat, Rajiv Gandhi, Kota, Yadadri, and Singareni, recorded noticeable declines in inventory levels during the period.
The daily reports also repeatedly highlight the need for improved railway rake availability and adherence to coal movement plans by supplying coal companies. This indicates that logistics continue to influence stock positions at individual plants, even where coal availability at the national level remains adequate.
Imported coal continues to play a strategic role
Imported coal demand presents a contrasting picture to the tightening domestic coal balance.
CEA data shows utilities continued to sharply reduce discretionary imports during the first two months of FY27, reflecting improved availability of domestic coal and efforts to minimise fuel costs. Imported coal receipts at thermal power plants declined to around 4.2 mnt in April 2026, down from approximately 5.7 mnt in April 2025, a y-o-y decline of nearly 26%. The trend persisted in May, with receipts falling to around 4 mnt, compared with about 5.3 mnt in May last year, representing a further decline of around 25%. Cumulatively, utilities imported roughly 8.2 mnt during April-May 2026 versus around 11 mnt during the corresponding period last year.
The decline has been driven primarily by reduced blending requirements at domestic coal-based power stations rather than lower utilisation of imported coal-based plants. Generating stations designed to operate exclusively on imported coal have continued procuring fuel, while utilities with flexibility have increasingly substituted imported cargoes with domestic supplies as Coal India maintained strong dispatches.
Nevertheless, the Centre has demonstrated that imported coal-fired generation continues to play a strategically important role in safeguarding grid reliability.
The Ministry of Power has extended directions under Section 11 of the Electricity Act, allowing Tata Power’s 4,150 MW Mundra imported coal-based power station to continue operating until 30 September 2026.
The extension ensures the continued operation of one of India’s largest imported coal-fired power plants during the high-demand season, reinforcing energy security. It also supports continued Indonesian coal imports, despite most utilities limiting discretionary purchases.
Logistics move centre stage
Alongside measures to preserve generation capacity, the government is also addressing one of the structural constraints affecting India’s coal supply chain–rail evacuation.
Indian Railways has approved an INR 755-crore third railway line between Champa and Korba, one of India’s busiest coal transportation corridors serving South Eastern Coalfields Ltd (SECL) and connecting central India’s coalfields with power stations across the country.
Although only 42 km in length, the project is expected to facilitate nearly 6 mnt/yr of additional freight movement while reducing congestion and improving rake turnaround times.
The timing is particularly significant given the latest railway loading data.
Coal companies loaded an average of 282.9 rakes/day for the power sector during May, substantially below the planned target of 340 rakes/day, achieving only around 83% of the monthly loading plan. Actual loading also remained below May 2025, when average loading stood at 287 rakes/day, despite continued growth in electricity demand.
The dispatch shortfall highlights that logistics, rather than coal availability, remain a key constraint in India’s coal supply chain. Expanding rail capacity through the Champa-Korba third line is expected to improve coal movement, ease transportation bottlenecks, and strengthen the resilience of domestic coal logistics.
Outlook
India’s coal market is entering the monsoon with gradually tightening fundamentals as record power demand keeps coal consumption elevated while domestic production remains under pressure. CIL has supported supply through inventory drawdowns, and the government is strengthening energy security by boosting logistics, supporting imported coal-based generation, and prioritising domestic output. Although supply conditions have tightened, the market remains stable, with domestic coal continuing to meet rising electricity demand and imports providing strategic support.
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