- Sep’26 imports seen rising 5% m-o-m to 12 mnt amid domestic logistics constraints
- Govt considers imported coal blending for domestic coal-based power plants
India enters the October-December quarter with a considerably tighter coal balance than a year ago, raising the prospect of a recovery in thermal coal imports after overseas purchases declined through much of 2026.
The emerging import requirement is not primarily the result of inadequate domestic coal availability. Instead, unusually strong electricity demand, weaker hydro generation and monsoon-related disruptions to mining and transportation have caused power plants to consume coal faster than supplies could be replenished.
With the monsoon ending and domestic coal production expected to recover seasonally, Q4 will essentially become a race between improving domestic coal receipts and sustained thermal coal consumption.
Import decline begins to moderate
India’s non-coking coal imports fell to 101 mnt during January-August 2026, down 9.3% from 111.4 mnt during the corresponding period of 2025, according to BigMint data. The contraction was particularly pronounced during April-June, when imports fell nearly 18% y-o-y to 40.4 mnt.
However, the trend has started to change during the monsoon quarter.
July-August imports were already 2.6% higher y-o-y. September imports are estimated at around 12.1 mnt, up approximately 5% from 11.5 mnt in August, although still below the unusually high 14.5 mnt recorded in September 2025.
The sequential increase is significant. It suggests that the steep import contraction seen earlier this year is beginning to moderate just as domestic power-sector coal inventories have deteriorated sharply.
Power plant stocks enter Q4 at seven days
The biggest change in India’s coal balance is at thermal power stations.
Across the CEA’s 190-plant universe, coal stocks had fallen to 21.8 mnt by 27 September, equivalent to only 37% of normative requirements, with 82 plants classified as critical.
Stocks were around 29 mnt at end-August, compared with 50 mnt a year earlier. Inventory cover had consequently fallen to nine days from 17 days in August 2025. By late September, overall cover had slipped further to around seven days.
This reflects exceptionally high coal consumption. During April-August, thermal power-plant coal consumption increased around 8% y-o-y to 395 mnt as power demand rose 9.5%.
September provided little respite. Peak electricity demand reached around 269 GW on 10 September, almost matching the 270 GW summer peak recorded in May.
Coal exists, but getting it to plants is the problem
The distinction between domestic coal availability and coal actually available at power stations is important.
Pithead inventories remain substantial. Coal India’s pithead stocks were around 76 mnt in early September, suggesting that the current tightening is primarily a problem of high burn, mining disruptions and evacuation rather than an absolute shortage of coal.
This is precisely where imports become relevant.
Coastal power stations can receive seaborne coal directly, reducing dependence on domestic mine-to-plant rail logistics. Imported material can also provide a temporary inventory buffer while more domestic coal is directed towards plants with fewer sourcing alternatives.
Weak hydro could sustain coal burn
India’s southwest monsoon ended 12.6% below normal, its weakest performance in more than a decade. The consequences will extend well beyond the end of September.
Storage across 178 monitored reservoirs stood at only 70% of capacity on 28 September, compared with 79% a year earlier and the 10-year average of 76.6%. Southern reservoirs were particularly weak at only 50%, against 87.25% last year.
Hydro generation was around 12% lower y-o-y during 1-23 September, forcing coal and gas generation to compensate for part of the shortfall.
The important implication for Q4 is that while the monsoon has ended, the hydro deficit has not. Reservoirs enter the post-monsoon period with materially less stored water than last year, potentially keeping coal-fired generation elevated.
El Nino adds to Q4 uncertainty
Strengthening El Nino conditions add another layer of uncertainty.
Its relevance to the coal market is indirect. Warmer and drier conditions could sustain cooling and agricultural pumping requirements, while the deficient monsoon has already reduced reservoir storage and hydro availability.
El Nino should therefore be viewed as an additional demand and hydro risk rather than the principal reason India could import more coal during Q4.
Imported blending returns to policy discussion
Against this backdrop, the government is considering requiring domestic-coal-based power plants to blend up to 5% imported coal, although no final decision has been announced.
This is significant because India’s import-substitution strategy had been working. Official data show power-sector coal imports fell nearly 25% y-o-y in April 2026, while imports specifically for blending at domestic-coal-based plants declined 11.3%.
Any renewed blending requirement would therefore be better viewed as a tactical fuel-security measure rather than a structural reversal of India’s domestic coal strategy.
Economics could restrain aggressive buying. Since May, Indonesian coal prices have risen around 20%, South African prices around 19% and Russian material around 14%, while freight has also strengthened.
Indonesia should nevertheless remain India’s principal swing supplier because of proximity and freight economics, while South African coal could benefit where consumers require higher-CV material.
October becomes critical test
Domestic coal supply should now receive a seasonal boost as mining conditions improve and evacuation normalises after the monsoon.
If coal receipts at power stations begin consistently exceeding consumption during October, inventories can gradually rebuild, and the need for additional imported coal could remain contained.
But India starts Q4 from an unusually weak position: power-plant stocks are around seven days, hydro availability is materially below last year and thermal generation requirements remain elevated.
If post-monsoon production and evacuation improve rapidly, imports should remain a supplementary balancing mechanism. But if coal burn stays elevated and TPP inventories struggle to rebuild, utilities could return more actively to the seaborne market.
The strategic issue also extends beyond December. India needs not only to meet Q4 electricity requirements but to rebuild coal inventories ahead of the summer 2027 demand peak.
In that context, imported coal could increasingly function as insurance — providing a temporary buffer while domestic production and logistics catch up and helping prevent the power sector from entering next summer with an inadequate stock cushion.
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