Power struggle: Why India’s thermal plants face a critical coal crunch
Coal inventories at power plants hit their lowest level since November 2023. But Crisil Intelligence says the decline appears to be a temporary logistics issue rather than a sign of structural supply stress.
- Sep 18, 2026,
- Updated Sep 18, 2026 2:52 PM IST
Coal inventories at India's thermal power plants fell sharply in August 2026, dropping 42% on-year to 29 million tonnes (MT) from 50 MT a year earlier, as a 13% surge in coal-based generation followed a spike in power demand, according to Crisil Intelligence.
The drawdown nearly halved coal stock cover to nine days from 17 days a year earlier, taking it to the lowest level since November 2023. The depletion was sharper at plants dependent on domestic coal, pointing to the challenges of timely inventory replenishment amid elevated power demand and higher coal consumption.
Between April and August, coal consumption by thermal plants rose 8% on-year to 395 MT, driven by a 9.5% increase in power demand following an abnormally hot summer and a below-normal southwest monsoon. Cumulative rainfall between June and August was 13% below the long-period average.
Key downside risks stem from adverse weather conditions that could further disrupt mining and coal evacuation, as well as from delays in improving rail availability and rake-loading capacity. Given the current inventory position, a sustained increase in coal dispatches will be essential to rebuild power plant stocks towards the historical average cover of 16-18 days.
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Jump in power generation
Overall power generation rose 10.5% year-on-year during these five months. Renewable energy generation surged 20.7% year-on-year, but its intermittent nature meant coal-fired power continued to play a critical role in meeting round-the-clock demand.
As a result, 51 of the country's 190 thermal plants were operating with critically low coal stocks in August, compared with 20 a year earlier. Most of these plants rely on domestic coal, underscoring the importance of timely inventory replenishment.
Inventory stress was concentrated in a handful of states. A significant share of coal-based generation capacity in Rajasthan (72%), Madhya Pradesh (69%) and Andhra Pradesh (60%) was operating with critically low coal stocks.
The Central Electricity Authority deems coal stocks at power plants critical when they fall 25% below the normative level. Bihar (45%) and Jharkhand (48%) also faced considerable stress, while 20-31% of coal-based capacity in other major states was similarly affected. In contrast, Odisha (10%) and West Bengal (6%) were relatively better placed.
“India's pithead inventories moderated sharply from a peak of 157 MT in early March 2026 to 76 MT in August 2026, reflecting the normalisation of elevated stocks. Current levels remain broadly aligned with the average of 76.1 MT recorded across August 2024 and 2025. This indicates that despite the significant drawdown, coal availability is adequate and there is no material supply-side stress,” says Sehul Bhatt, Director, Crisil Intelligence.
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The challenge
The key challenge has been the mismatch between rising demand and transportation capacity. Prolonged rains across the eastern coal belt disrupted mining operations and hampered coal evacuation.
During the April-August period, rake loading increased by only around 5% and coal receipts by 3%, even as coal consumption surged. Consequently, incremental evacuation was insufficient to replenish inventories at power plants. 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.
“In the second half of this fiscal year, 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% on-year,” says Surbhi Kaushal, Associate Director, Crisil Intelligence.
Power demand is estimated at 860-870 billion units, while coal-based generation is likely to retain its dominant 65-70% share of India's electricity mix. Given adequate inventories at miners and improving evacuation logistics, higher dispatch requirements should be met comfortably.
Coal inventories at India's thermal power plants fell sharply in August 2026, dropping 42% on-year to 29 million tonnes (MT) from 50 MT a year earlier, as a 13% surge in coal-based generation followed a spike in power demand, according to Crisil Intelligence.
The drawdown nearly halved coal stock cover to nine days from 17 days a year earlier, taking it to the lowest level since November 2023. The depletion was sharper at plants dependent on domestic coal, pointing to the challenges of timely inventory replenishment amid elevated power demand and higher coal consumption.
Between April and August, coal consumption by thermal plants rose 8% on-year to 395 MT, driven by a 9.5% increase in power demand following an abnormally hot summer and a below-normal southwest monsoon. Cumulative rainfall between June and August was 13% below the long-period average.
Key downside risks stem from adverse weather conditions that could further disrupt mining and coal evacuation, as well as from delays in improving rail availability and rake-loading capacity. Given the current inventory position, a sustained increase in coal dispatches will be essential to rebuild power plant stocks towards the historical average cover of 16-18 days.
MUST READ | India to export power to Nepal till Dec 31 after devastating flash floods
Jump in power generation
Overall power generation rose 10.5% year-on-year during these five months. Renewable energy generation surged 20.7% year-on-year, but its intermittent nature meant coal-fired power continued to play a critical role in meeting round-the-clock demand.
As a result, 51 of the country's 190 thermal plants were operating with critically low coal stocks in August, compared with 20 a year earlier. Most of these plants rely on domestic coal, underscoring the importance of timely inventory replenishment.
Inventory stress was concentrated in a handful of states. A significant share of coal-based generation capacity in Rajasthan (72%), Madhya Pradesh (69%) and Andhra Pradesh (60%) was operating with critically low coal stocks.
The Central Electricity Authority deems coal stocks at power plants critical when they fall 25% below the normative level. Bihar (45%) and Jharkhand (48%) also faced considerable stress, while 20-31% of coal-based capacity in other major states was similarly affected. In contrast, Odisha (10%) and West Bengal (6%) were relatively better placed.
“India's pithead inventories moderated sharply from a peak of 157 MT in early March 2026 to 76 MT in August 2026, reflecting the normalisation of elevated stocks. Current levels remain broadly aligned with the average of 76.1 MT recorded across August 2024 and 2025. This indicates that despite the significant drawdown, coal availability is adequate and there is no material supply-side stress,” says Sehul Bhatt, Director, Crisil Intelligence.
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The challenge
The key challenge has been the mismatch between rising demand and transportation capacity. Prolonged rains across the eastern coal belt disrupted mining operations and hampered coal evacuation.
During the April-August period, rake loading increased by only around 5% and coal receipts by 3%, even as coal consumption surged. Consequently, incremental evacuation was insufficient to replenish inventories at power plants. 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.
“In the second half of this fiscal year, 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% on-year,” says Surbhi Kaushal, Associate Director, Crisil Intelligence.
Power demand is estimated at 860-870 billion units, while coal-based generation is likely to retain its dominant 65-70% share of India's electricity mix. Given adequate inventories at miners and improving evacuation logistics, higher dispatch requirements should be met comfortably.