Coal supply for India's power sector has tightened further since the start of September, with plant inventories falling to about half of levels seen at the beginning of the fiscal year and the number of plants holding critical stock levels rising steadily.

Data from India's Central Electricity Authority (CEA) showed total available coal stocks at thermal power plants stood at 26.91 million tonnes as of September 5, just 47% of the normative requirement of 57.7 million tonnes, providing only 8.6 days of coverage. Of 190 coal-fired plants, 58 were holding stocks at critical levels.

Current inventory levels have dropped 54.4% from 59.02 million tonnes held at the start of the fiscal year on April 1, when plants held 19.2 days of coal supply and only 24 plants were at critical levels.

As the world's second-largest coal consumer, India relies on coal-fired generation for over 70% of its total electricity output, making plant stock levels directly critical to power supply stability. The current situation has raised widespread concerns over the reliability of electricity supply.

The low inventory levels stem from multiple factors, led by stronger-than-expected growth in power demand. India's electricity consumption growth has stayed above 10% since May, driven mainly by cooling demand, irrigation pumping and sustained industrial activity.

Analytics firm Kpler forecasts coal-fired generation in August 2026 will reach approximately 114 TWh, up nearly 14% year on year, with thermal output continuing to run well above normal seasonal levels with no signs of easing.

India also experienced its weakest monsoon season since 2009 in 2026, with rainfall about 12% below normal levels, curbing hydropower output and deepening reliance on coal-fired generation. Sustained strong demand has forced plants to operate at high load factors, depleting stocks far faster than they can be replenished.

Coal supply faced severe seasonal constraints during the rainy season. Heavy rainfall in July and August across key coal-producing states of Odisha, Jharkhand and Chhattisgarh severely disrupted mining operations.

Wet, sticky coal hampered transport and loading, while rail capacity also came under strain. An official at one large power generator said earlier that some plants requiring five to six trains of coal were receiving only half that amount.

Production data shows India's total coal output fell 3.07% year on year in the first four months of FY27 (April-July 2026), with state-run Coal India Ltd (CIL) recording a 4.26% decline. Although output recovered to nearly 1.7 million tonnes on September 4 from 1.4 million tonnes at the start of September as rains eased, the earlier production shortfall has pressured inventories.

The coal shortage and falling plant stocks have left Indian power plants facing widespread fuel deficits. Punjab's power minister Tarunpreet Singh Sond said recently that the nationwide coal shortage has worsened the state's power crisis, cutting generation by 1,500 MW and forcing large thermal plants to reduce output.

Sond said the impact extends beyond Punjab, with roughly 63 GW of power generation capacity across India affected by coal shortages. Many plants nationwide have only three to four days of coal supply and are running at about half capacity. He said he has asked the central government to take immediate and concrete measures to resolve the shortage and ensure uninterrupted power supply for households and industry.

The Indian government has launched multiple response measures to address critically low plant stocks. CIL, the country's largest coal producer, has allowed plants with fuel supply agreements with the company and its subsidiaries to lift coal beyond annual contracted volumes to ease immediate shortages. CIL's total supplies reached 323 million tonnes in the first five months of FY27, up 6.7% year on year.

The government has also strengthened inter-ministerial coordination, with the power, coal and railway ministries holding regular review meetings to coordinate coal production, loading and transport. Following these meetings, the government has directed subsidiaries including Northern Coalfields, Central Coalfields and South Eastern Coalfields to increase coal loading and strengthen supplies to the power sector.

To stabilise domestic supply, the government has previously introduced policies to reduce reliance on imported coal, including raising annual contracted volumes for eligible plants to 100% of normative requirements and allowing imported-coal plants to purchase domestic coal under the revised SHAKTI policy.

However, given the large current supply-demand gap, analysts expect India may need to step up coal imports in the fourth quarter of 2026 to rebuild inventories.

India's coal ministry said wet coal seams in producing areas are drying out, making newly mined coal easier to transport and handle. Stock levels are expected to improve as production and supply recover, though rebuilding inventories may take time given expectations of continued growth in India's power consumption.