India shelves coal import plan as high global prices, weak rupee raise costs

India paused its plan to require power plants to blend imported coal with domestic supplies. The immediate reason was cost. International thermal coal prices were at their highest level in three years, while the weaker rupee made each overseas shipment more expensive. The government judged that mandatory imports could deepen the financial pressure on the power sector.

Instead, policymakers asked Coal India Ltd to raise production. They also asked the railways to move coal to power stations more reliably. These steps target the shortage without adding as much exposure to international prices, currency movements, and higher shipping-related energy costs.

The decision comes during a serious supply squeeze. Nearly half of India’s power plants had critically low stocks on October 17. However, coal stock depletion slowed in October, and the government said supplies and rail loading had improved. It expects cooler temperatures and stronger domestic deliveries to help rebuild inventories.

Coal blending is the practice of combining coal from different sources before using it in a power plant. In this case, India considered mixing imported coal with domestic coal. The goal was to add another supply stream when local stockpiles were falling and electricity demand was high.

The key mechanism is straightforward: imported fuel would supplement domestic deliveries, giving plants more coal to burn. That could help them continue generating electricity while Coal India increased output and the railways moved more domestic coal. The proposal was intended to ease shortages, not replace domestic coal entirely.

The plan was put on hold because the extra supply was too costly. International thermal coal prices were at a three-year high, and the weaker rupee raised the local cost of imports. India therefore chose to strengthen domestic production and transportation instead, while monitoring plants with low inventories and redistributing supplies.

India’s coal shortage is broad and serious, although a critical-stock label is an early warning rather than proof that a plant will shut immediately. Power ministry data showed that nearly half of the country’s power plants had stocks below a quarter of their required levels on October 17.

Central Electricity Authority data gave the clearest scale. Of 190 coal-fired power plants, 87 had critical stocks as of October 8. Together, they held 20.6 million tonnes of coal, compared with a recommended stock of 61.2 million tonnes. That means their inventories equaled only 33 percent of the recommended level.

The situation had worsened from the first week of September, when 50 plants were listed with critical stocks. Still, the pace of depletion slowed in October. The coal ministry said supplies had increased, rail loading had strengthened, and low-stock plants were being monitored while coal was redistributed.

Coal-fired plants depend on steady fuel deliveries to keep generating electricity. If their inventories continue to fall, some plants could face increasing difficulty sustaining output. That would put more pressure on India’s electricity system, especially after September recorded the country’s worst power shortages for that month in nearly a decade.

The risk is clearest at plants with critical stocks. On October 8, 87 of 190 coal-fired plants held only 20.6 million tonnes, or 33 percent of the recommended 61.2 million tonnes. The ministry stressed that critical status is an early warning and does not necessarily mean an imminent shutdown, but it signals that supplies require close attention.

The government says the immediate trend has improved. Daily supplies rose about 36 percent from September levels, and inventory losses slowed in October. Rail loading exceeded 465 rakes a day. Sustaining 465 to 475 rakes daily could stabilize stocks and support rebuilding.

International coal prices directly affect the cost of buying coal from overseas suppliers. The article reports that benchmark thermal coal prices were at their highest level in three years. That means Indian power plants would pay more for imported fuel even before considering transport and other import costs.

The weaker rupee adds a second layer of expense. Overseas coal is purchased at international prices, while Indian companies face those costs in rupees. When the rupee weakens, more rupees are needed for the same foreign-currency purchase. Higher oil prices also increased India’s energy import bill, making additional overseas fuel less appealing.

These pressures changed the government’s response to the shortage. It had considered requiring plants to blend imported coal with domestic supplies, but put the proposal on hold. Policymakers instead prioritized Coal India’s production and railway deliveries, seeking to rebuild stocks through domestic supply and transportation.

The government’s alternative is to strengthen the domestic coal supply chain. It has asked Coal India Ltd to increase production, rather than relying on expensive overseas shipments. It has also asked the railways to ensure coal reaches power stations on time. Together, these measures target both fuel availability and delivery delays.

The mechanism depends on moving more coal every day. Rail loading averaged more than 465 rakes daily in October, and the target of 470 rakes was achieved on three consecutive days. Road and other transport modes also improved. The coal ministry said sustained movement of 465 to 475 rakes daily should stabilize inventories and support rebuilding.

The government is also monitoring plants with low stocks and redistributing supplies to support uninterrupted generation. More than 100 captive coal-fired plants were ordered to operate at maximum capacity from October 1 through year-end. These actions are designed to meet demand while domestic inventories recover.

Hot weather increases electricity consumption because more power is used for cooling and irrigation. In India, a poor monsoon kept temperatures elevated beyond the usual summer period. That extended heat added demand at a time when coal inventories were already under pressure.

Weak rainfall creates a second problem. Below-normal rain reduced hydropower generation, so coal-fired plants carried more of the electricity burden. Higher demand and less hydro output therefore pulled coal stocks down faster. The article reports that September’s electricity deficit became the worst for that month in nearly a decade.

Conditions improved somewhat in October. Domestic coal plants lost about 48,000 tonnes of inventory per day during the first 17 days, around one-fifth of September’s rate. Temperatures are expected to fall slightly, though remain above the 30-year normal. The government expects easing demand and stronger supplies to support recovery.