Coal imports: India’s 30% cut plan, 2025 stress test

A sharper import-cut mandate hits the power sector

India’s push to reduce thermal coal imports by at least 30% is emerging as an operational test for the power sector. The government directive seeks to replace around 15 million tonnes of imported thermal coal with domestic supply. A key assumption is that state-backed Coal India has significant stockpiles that can be redirected to plants currently dependent on imports. The policy goal is framed around energy security, with a clear intent to reduce reliance on overseas suppliers. But execution will depend on whether plants can physically and economically handle higher domestic coal blending. The transition also comes as India accelerates renewable energy targets, creating a dual-track energy strategy rather than a single shift away from coal.

What the thermal coal order asks power plants to do

Power plants consumed nearly 50 million tonnes of imported coal in 2025, and the new approach targets a sizeable reduction from that base. Plants are now expected to integrate at least 20% domestic coal into their fuel mix, with the potential requirement rising to 30%. That shift is especially relevant for nearly 17 gigawatts of power generation capacity that was built specifically for imported coal. For those units, fuel characteristics were typically tuned to imported coal grades, and the operational design may not match domestic coal properties. The government’s import-cut goal is clear, but plant-level implementation will vary based on boiler design, coal handling systems, and supply logistics. The change also tightens the operating envelope for plants that have relied on imports for consistency.

Economic and technical risks in higher domestic blending

The biggest stated risk is whether mandated blending is economically viable once retrofit costs are counted. Recalibrating boilers for different coal quality can be expensive, and those costs could exceed savings from reducing imported coal purchases. There is also a technical risk if domestic coal quality does not meet required standards for specific units. Lower suitability can translate into efficiency loss, higher maintenance, and greater wear on equipment. Operational inefficiencies can then raise costs in ways not captured by the headline reduction in the import bill. The article flags the possibility of generation disruptions if quality and compatibility issues are not addressed.

Why import-based capacity faces a tougher transition

The nearly 17 GW of capacity designed around imported coal sits at the centre of the operational challenge. These plants were built with a predictable imported coal profile in mind, and changing that profile can affect combustion and performance. The directive effectively asks such units to adjust fuel strategy in a short window while maintaining reliable generation. Even if domestic coal is available, plants still need consistent quality and adequate logistics to ensure stable operations. The transition is also sensitive to the speed at which domestic supplies can reach plants, particularly those located far from coal-producing regions. As a result, the shift is not only about volumes but also about deliverability and suitability.

Coal’s role as renewables scale up

Despite the growth in renewables, the article notes coal is likely to coexist with green sources for some time, even as its role is diminishing. This reflects India’s energy security approach, where dispatchable thermal capacity continues to anchor reliability. The import-cut directive shows the government’s preference for domestic coal when coal use is unavoidable. The same theme appears in the government’s treatment of different coal types, with separate strategies for thermal coal and coking coal. While thermal coal is linked to power supply security, coking coal is tied to industrial policy and steel capacity expansion.

Coking coal becomes a parallel policy priority

Alongside thermal coal, coking coal is being positioned as a strategic input for the steel sector. The Ministry of Coal has described its vision as making “Bharat Aatmanirbhar” through accelerated and efficient coal use while enhancing export potential. The government has designated coking coal as a critical mineral, signalling continued policy focus. A report by EY Parthenon in partnership with the Indian Steel Association (ISA) projects coking coal demand rising from 87 MT in FY25 to around 135 MT by FY30. The report links the increase to India’s ambition of 300 MT steel production capacity by 2030, while noting the steel sector consumes 95% of coking coal demand. It also states the blast furnace-basic oxygen furnace route accounts for about 65% of installed steel capacity and 58% of actual output.

Mission Coking Coal targets: production, washing, blending

To reduce import reliance, the Atmanirbhar Coal Mission under Mission Coking Coal targets domestic raw output of 140 MT by FY30. The EY-ISA report breaks this into 105 MT expected from Coal India and 35 MT from private allocations. Washed coal capacity is targeted to increase to 15 MT in the same framework. Separately, the article also cites a Mission Coking Coal pathway that aims to build 58 MT of coal washing capacity and supply 23 MT of washed coking coal by 2030. Blending is central to the strategy, with domestic coking coal blending targeted to rise from around 10-12% at present to 30-35% for steelmaking. The Ministry has encouraged adoption of Stamp Charging technology to enable the use of higher-ash domestic coal without compromising quality.

Auctions, linkages, and infrastructure measures

Policy measures cited include 100% FDI in mining, revenue-sharing auctions, and capital subsidies of 20-30% (also described as up to 30%) for washeries. The objective is to reduce import dependence from about 90% today to below 80% by 2030. The article also references a revenue sharing model where Coal India offered eleven discontinued coking coal mines to the private sector. It adds that the government plans to set up eight washeries by FY2030. On the supply side, coal linkages to the steel sector are being routed through Non-Regulated Sector (NRS) linkage auctions, with tenure revised up to 30 years. A new sub-sector, “Steel using coking coal through washery developer operator (WDO) route”, was created in March 2024 to increase availability of washed coking coal for steel mills.

Key metrics at a glance

Market impact: costs, reliability, and import exposure

For power producers, the mandate’s impact centres on reliability and cost, because boiler changes and higher maintenance can offset import savings. The operational risk becomes more acute for plants built around imported coal specifications, as they are being asked to accommodate domestic blends of 20% to 30%. For steel, the numbers underline why policy is focused on coking coal: imports meet around 85% to 90% of requirements in different parts of the article, and coking coal accounts for nearly 42% of steel production costs. Higher blending targets of 30-35% and domestic output goals of 140 MT by FY30 are intended to reduce exposure to international price volatility and supply disruptions. The market also has to absorb parallel investments in washeries, logistics, and technologies such as stamp charging and coal gasification.

Analysis: one coal policy, two operational challenges

Thermal coal and coking coal are being treated differently, but both strategies share a common constraint: compatibility between domestic supply and end-use equipment. For the power sector, the policy question is how quickly domestic coal can replace imports without forcing uneconomic retrofits or causing disruptions. For steel, the issue is whether beneficiation and blending can raise the usability of domestic coking coal at the pace implied by a rise in demand from 87 MT to 135 MT by FY30. The EY-ISA report’s emphasis on joint industry-government ventures, washery expansion, strategic stockpiles at ports, and overseas mine partnerships points to a supply chain approach rather than a single-point fix. The policy toolkit cited in the article, including 100% FDI in mining, revenue-sharing auctions, and washery subsidies, suggests the government is using multiple levers to expand domestic capacity while still acknowledging the need to diversify imports.

Conclusion: execution will decide whether targets hold

India’s 30% thermal coal import-cut push sets a clear near-term challenge for power generators, especially import-based plants that must blend more domestic coal. At the same time, Mission Coking Coal is tying coal policy to steel expansion, with demand projected to rise to around 135 MT by FY30 and domestic raw output targeted at 140 MT. The next phase will depend on how quickly blending, washeries, and linkage mechanisms translate into stable supply and workable fuel quality. Several measures already cited, including WDO-linked washed coal supply, long-tenure linkages, and gasification targets, point to an implementation-heavy roadmap rather than a single announcement. Any further updates are likely to track progress on domestic supply availability, blending execution, and the build-out of washing and logistics infrastructure.