India's power sector coal imports have reached their highest level in 15 months at 5.52 million tonnes in August 2026, representing a dramatic 85.6% year-on-year increase. According to iEnergy Natural Resources, this surge marks the third consecutive month of higher imports as utilities turn to costly overseas supplies to meet escalating demand. About 80% of imports, or 4.2 million tonnes, came from Indonesia, highlighting the sector's reliance on international coal sources. The International Energy Agency expects coal demand to return to historical growth trends in 2026, driven by growing cooling needs amid El Niño conditions and rising electricity demand.
Coal stocks at thermal power plants have reached their lowest level since November 2023, with coal stock cover falling to nine days currently from 17 days a year ago. According to Crisil, the volume of stocks plunged 42% to 29 million tonnes in August 2026 from 50 MT in the same month last year as coal-based generation rose about 13% amid a spike in power demand. Out of the country's 190 thermal plants, 51 were operating with critically low coal stocks in August, compared with 20 a year earlier, with inventory stress at 72% in Rajasthan, 69% in Madhya Pradesh and 60% in Andhra Pradesh. The actual level of stocks dropped 9 per cent from 26.2 MT on September 8 to 24.04 MT on September 13, while actual stocks as a percentage of normative stocks also slumped from 45% to 41% during the period. As Crisil noted, the stock depletion was concentrated among power plants dependent on domestic coal, highlighting the challenges of "timely inventory replenishment" amid elevated power demand and coal consumption.
The surge in coal imports has come at a significant cost as international coal prices have escalated sharply. Indonesian coal prices have risen 18% to 20%, while Russian and South African prices have jumped 14% and 19% respectively since May, according to traders. The supply gap has been substantial, with domestic coal dispatch to the power sector rising by only 2.3 million tonnes in August, well short of the 10 million-ton increase in consumption. As iEnergy noted, "Coal consumption surged more than expected in August, while domestic supply couldn't fully keep pace, driving many plants towards imported coal." The key challenge has been the mismatch between rising demand and transportation capacity, with prolonged rains across the eastern coal belt disrupted mining operations and hampered coal evacuation. During April-August, rake-loading increased only around 5% and coal receipts were up 3% even as coal consumption surged, making incremental evacuation insufficient to replenish inventories at power plants.
India's electricity demand has registered a year-on-year growth of 17.6% during the first 13 days of September 2026, following a 12.4% YoY increase in August 2026 owing to warm weather and deficient rainfall. Coal consumption by thermal plants rose 8% year-on-year to 395 MT between April and August, driven by a 9.5% increase in power demand after an abnormally hot summer and a below-normal southwest monsoon. Cumulative rainfall between June and August was 13% below the long-period average, while power generation during these five months rose nearly 10.5% year-on-year. Renewable energy generation, too, surged 20.7%, but coal-fired power continued to provide baseload support amid the lack of adequate energy storage for meeting round-the-clock demand. A supply shortage of around 6 gigawatts, or 2.5% of total demand met, occurred on September 10 and 11, though it improved to 0.5% on September 14. The latest state under stress is Karnataka, with Chief Minister D K Shivakumar flagging a shortage of drinking water and electricity, forcing the state government to purchase power at ₹11-13 per unit during evening peak hours.
Looking ahead, coal inventories are expected to begin recovering only if power demand moderates, monsoon disruptions ease and coal dispatches increase, although inventory levels are unlikely to return closer to normative levels in the near term. As reported by Crisil, "In the second half of this fiscal, electricity demand, coal-based generation, coal consumption and coal dispatches to power plants are all expected to grow in a narrow range of 6-7% year-on-year," with power demand estimated at 860-870 billion units. Coal-based generation is likely to retain its dominant 65-70% share of India's electricity mix. To ease the situation, Coal India permitted power plants with fuel supply agreements to lift additional coal by road, alongside rail transport, from September 7, 2026. However, downside risks stem from adverse weather conditions that could further disrupt mining and coal evacuation, and from delays in enhancing rail availability and rake-loading capacity. The decline in power plant stocks appeared to be a temporary logistical issue rather than a sign of any structural supply constraint, with Crisil noting that despite the significant drawdown, coal availability is adequate and there is no material supply-side stress.
