India's overhaul of its coal taxation structure earlier this month could lend support to state-owned Coal India Ltd. (CIL), which is contending with sluggish demand, mounting stockpiles, and intensifying competition from private miners and renewable energy, Bloomberg reported.

The move reduces the effective tax burden on domestically mined coal, making it more economically viable compared to pricier imports.

The government raised the Goods and Services Tax (GST) on coal from 5% to 18% and eliminated a special levy of 400 rupees ($4.5) per tonne, effective September 22. Although the GST hike adds roughly 217 rupees per tonne in taxes, the removal of the fixed charge translates to a net reduction of about 180 rupees per tonne for coal users, an important cost-saving at a time when power demand has been dampened by an unusually mild summer.

CIL sold coal at an average price of 1,670 rupees per tonne in the quarter ending June.

The tax cut aligns with the country's broader efforts to displace imported coal, which accounted for nearly 244 million tonnes or a quarter of India's total consumption in the fiscal year ending March 2025. By pushing domestic coal as a cheaper alternative, the firm could also curb foreign exchange outflows tied to overseas energy purchases.

The policy shift also comes as India attempts to bolster domestic demand and mitigate the impact of elevated tariffs imposed by the US, its leading export destination.