India’s Power Paradox: Why Coal is Still Our Backbone

The Nation That Runs on Two Tracks

Imagine an energy-dependent nation racing towards a net-zero future yet still tethered to black rock. That’s India today—where gleaming solar panels and roaring coal trains coexist. In FY2024–25, India’s coal output hit a record 1,047.6 million tonnes, supplying over 74% of its electricity. While non-fossil capacity is rising fast, coal remains the lifeline powering homes, factories, trains—and the dreams of 1.4 billion people.

Coal Still Powers the Core

India’s energy system still runs on coal. In FY2024–25, coal output reached 1,047.6 million tonnes (up 4.99% from FY2023–24), helping meet around 55% of India’s total energy needs and over 74% of its electricity. For comparison, non-fossil sources now account for roughly 45–46% of installed capacity, but coal’s share of actual generation remains about three-quarters.

Even as solar and wind capacity have surged, the coal fleet provides the reliable baseload. India’s thermal capacity stands at ~217 GW (coal & lignite, Sept 2024), with another ~28 GW under construction and ~58 GW in planning. New coal plants and expansions (12.8 GW awarded recently) are explicitly part of the government’s planning – the National Electricity Plan targets 283 GW of coal/lignite by 2031–32, implying at least 80 GW of new coal capacity.

In short, coal remains the bedrock of India’s power sector, providing affordable, round-the-clock power that intermittent renewables alone cannot yet guarantee.

Coal’s Role in Electricity Generation

The Backbone of Base Load Power

Coal plants run continuously to meet India’s growing demand. In FY2023–24, the country generated 1,734 TWh of power, and 74.7% of that came from coal. Wind, solar, and hydro combined contributed ~20.8%, and nuclear added about 2.8%.

This heavy reliance is due to coal’s base-load role: these plants are designed to run 24×7 and often operate at 60–70% Plant Load Factor (PLF). They offer the stability needed for a grid that must remain active regardless of weather or time of day.

Why Installed Coal Capacity Appears ‘Excess’

India’s coal capacity (217 GW) may seem high compared to midday demand—but this is intentional. High installed capacity ensures that coal can reliably ramp up generation when needed, especially during evening peaks or cloudy, windless days. For example, on 30 May 2024, India hit a record 250 GW demand, with ~188 GW of thermal power still online to maintain balance.

Dispatch Volumes Continue to Rise

Coal dispatch volumes—coal sent to thermal power stations and industry—reached 1,024.99 million tonnes in FY24–25, up from 973.01 MT the previous year. Even as coal imports fell by ~8.4% (Apr–Dec 2024), higher domestic output more than compensated. This indicates a steady rise in coal consumption to match India’s rising power needs.

Stability Amidst the Renewable Surge

Despite record solar additions and growing wind capacity, coal’s share of actual generation remains remarkably steady. Analysts and official documents, including the Economic Survey, confirm that coal continues to supply 70–75% of India's electricity—making it a stabilizing force amidst a volatile generation mix.

Coal in Industry and the Economy

The Foundation of Industrial Energy

Coal is indispensable to core industries—not just for power generation, but as a direct energy source. It fuels steel furnaces, powers cement kilns, and supports fertilizer production (via gasification routes). Without coal, many industrial processes would grind to a halt or become economically unviable.

Coking Coal: An Import Reliance

India’s domestic coal lacks sufficient quality for metallurgical-grade use in steelmaking. As a result, India remains heavily reliant on coking coal imports—tens of millions of tonnes per year—even as total coal imports are reduced. This distinction is critical: while thermal coal demand is increasingly met domestically, coking coal remains a vulnerable import dependency.

Coal’s Deep Economic Footprint

The coal sector is deeply embedded in the Indian economy:

• It powers industrial clusters.

• It fuels transport—with coal accounting for ~49% of railway freight revenue (₹82,275 crore in FY22–23).

• It funds public finances, contributing over ₹70,000 crore annually through royalties, GST, and duties.

• It supports employment: Coal India Ltd alone employs ~239,000 people, not counting the extended ecosystem of contractors, logistics providers, and equipment manufacturers.

Rural Development and Livelihoods

Coal revenues support District Mineral Funds (DMFs) that finance rural infrastructure, healthcare, and education in mining regions. In areas where alternative employment is scarce, the coal economy acts as a social safety net, offering jobs and income stability.

Universal Electrification—Powered by Coal

Coal-based power has been the backbone of India’s electrification drive. Today, nearly 100% of villages are electrified, and coal remains the primary energy source powering those connections. This success story of access is tied directly to India’s expansive thermal generation network.

Can India Do Without Coal Yet?

Not Quite. Here’s Why:

Solar and wind capacity are growing fast (non-fossil capacity is ~211 GW, or 46% of total, including 82 GW of solar by early 2024), but they face limitations.

Intermittency is the biggest issue: solar only generates in daylight hours, wind is unpredictable, and neither can provide steady power 24/7. Battery storage can help but remains expensive and currently limited in scale. Even with falling costs, large-scale storage requires new investment and infrastructure.

On most days, India still needs coal plants running overnight.

Why Alternatives Fall Short (For Now)

Hydro Has Geographic Limits

Large hydro is another renewable alternative, but India’s geography limits new projects. About 45–50 GW of hydro is already installed, and many prime sites are utilized. New dams face long delays, land issues, and social/environmental concerns.

Nuclear Is Too Small and Slow

Nuclear power (7–10 GW now) also plays a tiny role (<3% of generation). New reactors take years to build and involve high costs, and India’s nuclear expansion has been slow (only a few GW in the pipeline). In short, no other option can yet match coal’s reliability, scale, and low per-unit cost across India’s vast, growing economy.

Is Coal Really Cheaper? Yes – If You Want Round-the-Clock Power

Modern solar and wind are very cheap on a per-kWh basis. Recent Indian bids show utility solar around ₹2.5–3.0/kWh and wind around ₹3–3.5/kWh. By contrast, new coal plants (using imported coal or meeting stricter emission controls) typically run about ₹3.5–5.0/kWh.

However, coal plants can supply power continuously at this cost. To get a similar firm (24×7) supply from renewables requires storage or backup. Including batteries raises the effective cost of solar: studies estimate round-the-clock solar (with 4–8 hours of storage) ends up around ₹4–5/kWh.

Even with the drop in renewable tariffs, coal remains cost-competitive—especially in regions where financing and fuel access lower operating costs. Policymakers continue to build both: renewable capacity through auctions and thermal capacity through new coal plant approvals.

Coal Policy: Strengthening the Spine

The central government’s planning documents make clear that coal will stay essential for years to come.

The National Electricity Plan (2023–2032) envisions India needing ~283 GW of coal/lignite capacity by 2032 (to meet ~458 GW peak demand), up from ~217 GW now. The Ministry of Power is therefore approving new coal projects.

In fact, in the new government’s first 100 days it approved 12.8 GW of new coal plants. The fiscal plan also allocates roughly ₹6.67 lakh crore for these thermal additions by 2031–32.

Other measures include:

• Relaxed quality norms (removal of distance-based ash limits)

• Increased mine auctions, including commercial mining

• Mission Coking Coal

• ₹8,500 crore in incentives for syngas/ammonia from coal gasification

• 50% revenue share rebate in gasification tenders

India’s vast domestic reserves (5th largest globally) make coal a cornerstone for energy security and import substitution.

Coal’s Downside: Pollution, Ash, and Emissions

This is not to say coal has no problems. India’s coal is generally low-grade and high ash, with 35–50% ash content in most mined coal. Many older power plants lack coal-washing facilities, so they burn dirty coal and emit more particulates, mercury, and CO₂ than cleaner fuels.

Even with newer emission norms (like flue-gas desulfurization), the sector remains India’s largest source of CO₂ and air pollutants. The inefficiencies are baked in: more coal is burned per kWh, transport costs rise, and boiler wear increases.

Gasification and washing plants can help, but only a fraction of coal is currently beneficiated. Washery capacity remains under-utilized.

But these issues are now on the radar:

• New CIL investments in coal beneficiation

• Government push for more aggressive washing policies

• Emerging mandates for retrofitting older plants

Conclusion: Balancing Growth, Reliability, and Sustainability

“Backbone” coal has its cracks. It underpins growth and electrification—but at a cost. India’s policymakers understand this trade off: energy access today versus clean energy tomorrow.

The challenge isn’t eliminating coal overnight—it’s upgrading quality, reducing emissions, and transitioning responsibly. India is walking a tightrope between energy security and environmental sustainability—and coal, for now, still holds the safety net.

In our next post, we take a hard look at the problems we must urgently solve—and the innovations that could finally make coal cleaner.