India’s Coal Market Enters Structural Shift as Renewables Expand and Energy Markets Mature: MCX Report

India’s coal and energy sector is undergoing a structural shift as the rapid expansion of renewable energy, rising domestic coal production and the development of competitive energy markets reshape the way coal is procured, priced and managed, according to a report by the Multi Commodity Exchange of India (MCX).

Titled “Black Diamond: Coal – Backbone of India’s Energy Security,” the report highlights that India’s coal market is gradually moving away from a volume-driven model towards one focused on operational flexibility, transparent price discovery and risk management.

Coal continues to remain the backbone of India’s electricity system. Coal-fired power plants generated around 1,280 billion units (BU) of electricity in FY2025-26, accounting for nearly 69% of total power generation. Although coal’s share declined from around 72% a year earlier, the fuel continues to provide dependable and dispatchable power to meet the country’s growing electricity demand.

Renewable Expansion Changes Coal’s Role

India added 44.62 GW of renewable energy capacity during FY2025-26, further increasing the contribution of solar and wind power to the electricity mix.

With renewable generation growing, coal-fired power plants are increasingly being required to operate flexibly, responding to fluctuations in renewable output and periods of peak electricity demand rather than functioning primarily as baseload generators.

Domestic Coal Production Strengthens

The changing energy mix is also being supported by improvements in domestic coal availability. Captive and commercial coal mines have emerged as an important source of incremental supply, with their share of national coal production increasing significantly.

According to the report, captive and private producers accounted for around 26% of India’s coal production in FY2025-26, compared with approximately 20% in FY2022. Higher domestic production has helped improve fuel availability and reduce dependence on imported thermal coal.

Thermal Coal Imports Decline

India’s changing domestic supply position is reflected in its coal import requirements. Non-coking coal imports declined to around 159.7 million tonnes in FY2026, compared with 169 million tonnes in FY2025, indicating stronger domestic availability and lower reliance on imported thermal coal.

However, the decline in thermal coal imports does not indicate that India’s dependence on imported coal is disappearing. Instead, the composition of imports is shifting towards fuels required by the steel industry.

Coking coal imports increased 12.4% year-on-year to around 63.7 million tonnes, while PCI coal imports also rose. The increase reflects continued demand from India’s steel sector, where specific grades of metallurgical coal remain important for blast furnace operations and cannot always be substituted by domestic supplies.

Import Sources Become More Diversified

India’s coal import basket is consequently becoming more diversified and increasingly focused on the steel sector. Indonesia remains a major source of thermal coal, although its volumes have moderated as domestic availability improves.

Meanwhile, Australia and Russia continue to be important sources of metallurgical coal, while South Africa remains a key supplier of thermal coal to India.

Focus Shifts to Price, Timing and Risk Management

The MCX report suggests that India’s coal market is no longer simply about increasing production or imports. The focus is increasingly shifting towards procuring the right fuel at the right price and time while managing market and operational risks.

As renewable energy penetration increases and electricity and commodity markets become more sophisticated, coal procurement is expected to become increasingly portfolio-based, with greater emphasis on market intelligence, operational flexibility, transparent benchmarks and financial risk management.

The report concludes that India’s energy transition is not simply a shift from coal to renewable energy but a broader transformation of the economics and operating model of the energy value chain.

While coal is expected to remain important for energy security and grid balancing, its future role will increasingly depend on how efficiently physical supply, flexible operations, transparent price discovery and risk-management mechanisms can work together. Organised commodity exchanges, according to the report, could play a growing role in building a more efficient, resilient and competitive energy ecosystem.