Sharp Decline in India’s Coal Output Raises Energy Sector Concerns

New Delhi, June 12, 2025

India’s Coal Output Witnesses a Decline Amid Ongoing Energy Sector Challenges

India’s coal output continues to see a downward trend, marking a sharp 4.7% fall during the April-May period of 2025. According to recent assessments by Nuvama, this decline is expected to further deepen in June, sparking concern across the energy sector. The sharp decline in coal output comes at a time when the country is striving to meet increasing power demands during the peak summer season.

The Pattern of Decline in Coal Output

The decline in coal output during April and May 2025 reflects not only seasonal fluctuations but also operational inefficiencies and environmental constraints affecting coal mining across various states. Reports suggest that several coal-producing regions are grappling with logistical issues, labor shortages, and regulatory delays, leading to the current supply shortfall.

As the world’s second-largest coal producer, India heavily depends on coal to generate electricity. A consistent drop in production has the potential to impact both industrial output and household energy consumption.

Nuvama’s Forecast: More Trouble in June

Nuvama’s analysis reveals that June will likely bring another sharp decline in coal output, further tightening the supply chain. This expected drop could push power generation companies to rely more heavily on imported coal, which will, in turn, increase the cost of electricity production and hurt the economy.

The sharp decline in coal output is particularly concerning for thermal power plants, which account for more than 70% of India’s electricity generation. Several plants have already reported lower coal inventories and are operating at reduced capacities.

Government’s Response and Future Measures

In response to the sharp decline in coal output, the Ministry of Coal has initiated steps to enhance domestic production through strategic investments and policy support. Measures include faster environmental clearances for new mines, digital monitoring of mining activities, and ramping up of Coal India Ltd’s production targets.

Despite these initiatives, the gap between demand and supply is expected to widen if corrective measures are not implemented promptly. The government has also urged states to build up their coal reserves and reduce dependence on a centralized supply.

Impact on Industries and the Economy

The sharp decline in coal output is sending ripples across sectors like steel, cement, and aluminum, which rely heavily on thermal power. Manufacturers are concerned that frequent power shortages and rising input costs may reduce competitiveness and impact exports.

Economists warn that a continued fall in coal production could increase inflationary pressures and slow down economic growth. The rising cost of electricity may also affect small and medium enterprises (SMEs), leading to reduced profit margins and operational disruptions.

Renewable Energy Still a Distant Goal

While India is making progress in renewable energy deployment, coal remains the backbone of its energy mix. Experts believe that until renewable sources like solar and wind can fully compensate for coal’s share, any sharp decline in coal output will leave the energy grid vulnerable.

The sharp decline in coal output underlines the urgent need to accelerate diversification in energy sources while strengthening existing coal infrastructure.