India's non-coking coal imports fall 5% y-o-y in FY'26 on weak thermal power demand, strong domestic supply

• Power demand up just 1% y-o-y; coal-fired generation dips by 3%
  
  
• Surging renewable, hydropower generation weighs on coal demand
  
  
• South African imports rise 1% despite 8% growth in sponge iron output
  
  

Morning Brief: India's non-coking coal imports fell by 5.4% y-o-y to 160 million tonnes (mnt) in FY'26, according to data maintained by BigMint. Weaker power sector demand dragged down total imports; coal-fired generation declined 3% in FY'26 amid record clean energy additions and reduced cooling demand due to an above-normal monsoon.

At the same time, higher domestic coal output, improved supply, and cost optimisation by cement, sponge iron, and brick sectors decreased reliance on imports.

Factors influencing India's thermal coal imports in FY'26

Power sector demand weakens: Imports of Indonesian thermal coal, used primarily in the power sector, fell 9% to 94.6 mnt amid a 3% drop in coal-fired electricity generation to 1.28 trillion units.

This could be attributed to two factors. First, renewable generation surged 21% y-o-y, displacing part of coal-fired generation. Hydropower output also rose 13% y-o-y, aided by a strong monsoon, which also eased reliance on coal. Secondly, India faced an extended monsoon, with above-normal rainfall, which reduced cooling demand. This limited growth in India's power consumption to a minor 1% y-o-y at 1.71 trillion units in FY'26.

In fact, CY'25 was only the third year in the last five decades to record a y-o-y decline in coal-fired power generation, according to the International Energy Agency (IEA).

In FY'26, non-fossil fuel capacity additions reached 55.29 gigawatts (GW) -- the highest increase ever and surging 87% from 29.5 GW in FY'25. Solar capacity additions stood at about 45 GW, while wind capacity grew 46% y-o-y to 6.05 GW, both reaching their highest-ever volumes. India also crossed 50% cumulative installed capacity from non-fossil sources in June 2025, well ahead of its 2030 target.

Non-coking coal production rises marginally y-o-y: India's non-coking coal production inched down to 975 mnt in FY'26, as per Ministry of Coal, from 981 mnt in FY'25.

Pointing to ample domestic availability, pithead coal stocks at Coal India's mines increased to 126 mnt as on 18 March 2026 from 107 mnt on 1 April 2025. Besides easy availability, domestic coal also remained competitive, with 5000 GCV prices at INR 5,500/t ex-Bilaspur, down 8% y-o-y, encouraging substitution away from imports.

Rising DRI production supports South African imports: South African coal imports rose 0.6% to 33.7 mnt, supported by an 8% increase in sponge iron output to 60 mnt. However, import growth lagged sponge iron output as producers increased domestic coal usage amid weak sponge iron prices, which hovered near end-2020 levels between May and December.

Cement producers switch from petcoke: US thermal coal imports increased by 14% y-o-y to 13.7 mnt in FY'26, primarily due to relative cost competitiveness versus petcoke. Elevated global prices and firm freights increased petcoke procurement costs, particularly from Q3, prompting cement producers to pivot to US high-calorific value (CV) North Appalachian (NAPP) thermal coal. India's petcoke imports declined 15% y-o-y to 13.7 mnt in FY'26.

For example, in mid-March 2026, US NAPP coal at $145-146/t offered a lower cost per unit of calorific value compared to high-sulphur US Gulf petcoke (6.5% sulphur), at about $165/t CFR west coast India.

Outlook

BigMint expects India's non-coking coal imports to rise slightly over the summer months as the peak power demand season sets in. Coal requirement for domestic coal-based power plants is projected to rise 11.5% in Q1FY'27, attributed to above-normal summer temperatures and a low base effect.

However, imports are unlikely to increase substantially, given that total coal stockpiles stood at a record 224 mnt in the first week of April against 201 mnt in the year-ago period. Government policy is also explicitly geared towards import substitution, with targets to reduce thermal coal imports in the power sector by up to 30%, according to media reports.

For FY'27, the power ministry has reportedly indicated a coal requirement of 906 mnt to the coal ministry, up from 826 mnt in FY'26. According to CRISIL, India's power demand is projected to grow 5.5-6.5% in FY'27, supported by higher temperatures and potential below-normal rainfall under El Nino. However, according to reports, real consumption may reach up to 850 mnt in FY'27 due to robust renewable growth despite higher summer temperatures.

Nonetheless, there is some upside risk to imports from plants designed to run on imported coal. Policy discussions to mandate higher utilisation at such plants could support marginal import demand during peak months.