Will Coal India Be the Biggest Winner of the Govt’s 30% Thermal Coal Import Cut Plan?

Synopsis :- India plans to cut coal imports by 30% in 2026, boosting domestic coal usage, improving energy self-reliance, and benefiting local producers, while power plants face operational and cost-related adaptation challenges.

India’s plan to cut coal imports by 30 percent has grabbed attention across the power and energy sectors. The move is expected to influence domestic coal demand, supply chains, and the operations of power plants, prompting discussions among industry experts, investors, and policymakers about its potential impact on the country’s energy landscape and thermal power generation.

With the market capitalization of Rs. 2,76,090.23 crore, the shares of Coal India Limited were trading at Rs. 449.40, up by 3.27 percent from its previous day’s close price of Rs. 435.15 per equity share. 

What Is the Government’s Plan?

India plans to cut thermal coal imports by at least 30 percent in 2026. In 2025, power plants imported nearly 50 million tonnes of coal. The government now aims to reduce this by around 15 million tonnes by encouraging power plants to blend more domestic coal with imported coal. The move is designed to reduce import dependence, save foreign exchange, and make better use of increasing domestic coal production.

Why Is India Taking This Step Now?

Despite rapid growth in renewable energy, India still generates around 75 percent of its electricity from coal. Domestic coal production has surged in recent years, particularly from Coal India, which recorded a historic output last fiscal year. 

At the same time, coal stockpiles have grown substantially, creating pressure to increase local consumption. The government believes that improved domestic supply can gradually replace a significant portion of imported coal, making power generation more self-reliant.

A major hurdle for this plan is the quality of domestic coal. Many power plants, particularly those built to run on imported coal, are designed for higher-calorific fuel. Indian coal generally has lower calorific value and higher ash content.

Increasing domestic coal blending may require costly recalibration of boilers, and power producers may need government support if retrofitting becomes necessary. These technical limitations make achieving the 30 percent target challenging.

Will Coal India Be the Biggest Beneficiary?

Coal India could emerge as a key winner if imports decline. With large inventories on hand, higher domestic offtake from power plants could improve sales visibility and strengthen pricing power for the company. However, the extent of these gains will depend on whether power plants can effectively use more Indian coal without operational disruptions.

What Does This Mean for Power Plants?

Power plants are being asked to replace at least 20 percent of imported coal, with some plants potentially increasing that share to 30 percent. If implemented successfully, fuel sourcing will become more domestic-focused, import bills will decline, and energy security will improve. On the other hand, operational inefficiencies or higher costs could arise if plants struggle to adapt to domestic coal, potentially affecting overall generation efficiency.

Long-Term Energy Impact

Even as India aggressively expands renewable energy toward its 2070 net-zero goal, coal will continue to be central to the energy mix. India plans to expand coal-fired capacity in the coming decade. Over time, imports may gradually shift from the power sector to industries like cement and sponge iron, which require specific coal grades. This indicates that while imports may reduce, they are unlikely to disappear entirely.

About the Company & Financial

Coal India Limited, headquartered in Kolkata and incorporated in 1973, is India’s largest coal producer, offering a wide range of coal products for industrial, power, and domestic use. Its portfolio includes coking coal for steel and metallurgical industries, semi-coking and non-coking coal for power generation, cement, fertilizer, and other manufacturing sectors, as well as washed and beneficiated coal, middling and rejected products, and CIL/LTC coke.

A return on equity (ROE) of about 38.9 percent, a return on capital employed (ROCE) of about 48 percent and debt to equity ratio at 0.13 demonstrate the company’s financial position. At the moment, the company’s P/E ratio is 9.29x lower as compared to its industry P/E 16x.  

Coal India Limited reported Q3FY26 revenue of Rs. 34,924 crore, down 5.3 percent YoY from Rs. 36,859 crore in Q3FY25 but up 15.7 percent QoQ from Rs. 30,187 crore in Q2FY26. EBITDA for the quarter stood at Rs. 9,331 crore, a decline of 24.2 percent YoY from Rs. 12,317 crore but a strong 38.9 percent increase QoQ from Rs. 6,716 crore, reflecting improved operational efficiency compared to the previous quarter.

Net profit in Q3FY26 was Rs. 7,166 crore, down 15.6 percent YoY from Rs. 8,491 crore but up 68.2 percent QoQ from Rs. 4,263 crore in Q2FY26. The sequential recovery in both EBITDA and profit indicates a rebound in operational performance despite annual pressure from softer coal prices and higher costs, while YoY comparisons reflect a moderation from last year’s strong performance.

Conclusion

The 30 percent coal import cut represents a bold attempt to boost energy self-reliance and maximize domestic coal usage. For Coal India, it presents a significant growth opportunity. For power plants, however, it raises operational and cost-related challenges. Whether this policy becomes a transformative reform or a risky experiment will depend on how smoothly domestic coal can replace imported fuel without disrupting power generation efficiency.

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