India's cheap thermal coal boosts power generation

New Delhi

A report by BofA Securities highlights that thermal coal prices in India have become relatively low, making it a cost-effective fuel for power generation. This has further strengthened coal-based electricity production in the country.

With India’s economic growth on the rise, coal-fired power generation is outpacing all other energy sources. Additionally, strong domestic coal production has reduced the dependence on imports, limiting support for international coal prices, the report noted.

In 2024, India’s coal-fired power generation was robust, and recent investments in new power plants indicate that coal consumption may reach a record high in 2025.

"Beyond India and taking the baton from China, other developing economies, such as Vietnam, have emerged in recent years as robust thermal coal importers, a trend that will likely continue for the next 18 months," the report stated.

BofA Securities also pointed out similarities between India and China that are keeping global coal prices low. While coal demand remains strong, Indian power plants have high coal stock levels, with over 90% coming from domestic sources.

However, the report suggested that new power capacity in India’s coastal areas may lead to stronger demand for imported coal in the coming years. Global coal prices have dropped since late November due to rising coal inventories in China, and competition from renewables continues to reduce China’s coal imports.