As India’s economy grows, its demand for electricity is also rising rapidly. Increasing industrial activity, the expansion of data centres, greater use of air conditioning and rising household consumption are putting pressure on the power sector. Despite adequate coal availability in the country, several thermal power plants are not receiving supplies on time.
This situation highlights that coal availability alone is not enough to ensure uninterrupted electricity generation. Better coordination between mining, railway transportation, storage and rising demand is also essential.
Let us understand the coal supply challenges facing India’s thermal power sector and examine what they mean for power companies, the economy and investors.
What’s Happening?
Coal stocks at India’s thermal power plants have declined rapidly. According to ET Government, as of 19 October 2026, 96 of the 191 thermal power plants being monitored had less than three days’ worth of coal remaining. In mid-September, 60 plants were in the same situation.
In September, coal-based electricity generation rose 13.3% YoY, while hydropower generation fell 20%. This increased dependence on coal for electricity generation. Between June and September, monthly coal consumption at power plants remained around 79 million tonnes. However, coal supplies to power stations declined from 74 million tonnes in May to 66 million tonnes in August.
According to ICRA, domestic coal production declined 3.2% in the first five months of FY27, while coal supplies to the power sector rose 4%. This gap highlights the growing challenge of balancing production, available stocks and actual deliveries to power plants.
Why Is There Difficulty in Supply Despite Coal Being Available?
The coal shortage is largely linked to transportation and supply chain challenges, along with changes in production.
In September, approximately 76 million tonnes of coal was available near Coal India’s mines. Despite this, coal stocks at power plants remained low. One of the main reasons was the difficulty in transporting coal from mines to power stations. Rain disrupted mining and transportation in some coal-producing regions. Meanwhile, power plants located farther from the mines were more vulnerable to supply disruptions because they depend heavily on railway transportation.
The government has stepped up coordination with the railways and coal producers. During the first 10 days of October, average daily coal supplies rose from 2.21 million tonnes in September to 2.49 million tonnes. Railway rake loading also increased from 426 to 469 rakes per day. However, having sufficient coal at the mines is not enough. Ensuring regular deliveries to power plants remains the bigger challenge.
Impact of Rising Power Demand and Electricity Prices
Demand for electricity in India is rising faster than previously expected. ICRA has revised its estimate for power demand growth in FY27 from 6.5% to 8.5%. On 5th and 8th October, peak power demand reached 260 GW. Demand stood at 269 GW in September, while the annual peak of 270 GW was recorded in May.
Rising demand and supply constraints put upward pressure on electricity prices at the beginning of October. However, prices eased somewhat in the second half of the month as the weather cooled. According to The Indian Express, between 1st and 21st October, the average electricity price in the day-ahead market fell to Rs 7.6 per unit from Rs 7.8 in September. In the real-time market, the price declined by approximately 14% to Rs 6.7 per unit.
This shows that electricity prices depend not only on coal stocks but also on weather conditions, demand and the generation capacity available to meet that demand.
What Does This Mean for Investors?
Coal supply constraints and rising electricity demand present both opportunities and challenges for companies in the power sector. Thermal power companies need to maintain adequate coal stocks to keep their plants running. Supply disruptions can affect electricity generation, while using more expensive imported coal can increase costs.
At the same time, rising electricity demand could create a need for additional generation capacity and greater investment in power infrastructure. Investors should monitor coal availability, plant utilisation levels, electricity sale prices and supply chain conditions to understand how these factors could affect power companies.
What’s Next?
In the coming years, thermal power is likely to remain important alongside renewable energy in meeting India’s electricity needs. According to The Financial Express, the country could require an additional 105-150 GW of coal-based capacity by 2035.
Meanwhile, the Central Electricity Authority’s plan estimates that by FY36, India could have 509 GW of solar capacity, 155 GW of wind capacity, 174 GW of battery and pumped storage capacity, and 315 GW of coal-based capacity. However, solar power is unavailable after sunset, and energy storage capacity still has limitations. Reliable generation capacity will therefore remain important for meeting electricity demand, particularly at night.
India’s challenge is not just to increase coal production. It must also improve transportation, maintain adequate stocks at power plants and ensure a reliable electricity supply.
Disclaimer: This article is for educational and informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. The companies mentioned are cited as examples within the context of market developments. Investors are advised to conduct their own due diligence and consult their financial advisor before making any investment decisions.
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