Power generators that have consistently maintained coal inventories in line with prescribed norms risk being indirectly penalised as emergency supplies are diverted to plants that have failed to maintain adequate stocks, industry analysts and officials said.

India’s coal-allocation framework is designed to provide thermal power generators with greater certainty over fuel supplies and enable them to plan inventories. The revised SHAKTI Policy, approved by the Central Government in May 2025, streamlined coal-linkage allocation into two windows.

Under Window I, central generating companies and states receive coal linkages at notified prices. Window II allows eligible producers, including imported-coal-based plants, to procure coal through auctions at a premium over the notified price.

The framework operates alongside Fuel Supply Agreements (FSAs) and norms prescribed by the Central Electricity Authority (CEA) for maintaining adequate coal stocks at power plants. The broader objective is to ensure predictable fuel supplies and enable generators to plan their requirements.

However, industry officials said the emerging concern is increasingly not the availability of domestic coal, but the ability of individual generating stations to maintain adequate inventories on a sustained basis.

Domestic coal production rose to a record 1,047.52 million tonnes (MT) in FY25 from 997.83 mt in FY24, while overall coal supply increased to 1,025.33 MT from 973.01 MT during the same period.

By March 2026, aggregate coal stocks across mines, power plants and transit were estimated at around 210 MT. Stocks at power plants stood at 54.05MT, equivalent to nearly 24 days of consumption, according to industry officials.

The importance of reliable thermal generation has grown alongside rising electricity demand. Coal- and lignite-based power plants, with installed capacity of around 230.8 GW, accounted for 69.54% of electricity supplied during April-June 2026, according to available data.

During non-solar peak hours, thermal generation reached about 188.8 GW, accounting for roughly 75% of total generation. Peak power demand touched 270.2 GW in May.

“Strong national availability, however, does not guarantee uniform stocks across generating stations. CEA monitoring has shown differences in plant-level inventories, making fuel management an important part of India’s energy-security framework,” an industry official said.

The official said emergency intervention may be warranted when genuine supply-side disruptions—including mine-related disruptions, railway constraints, force-majeure events or sudden demand surges—threaten the operation of a plant or grid stability.

“However, the response should distinguish genuine supply-side disruptions from persistent shortfalls at errant plants caused by inadequate and careless inventory planning,” the official said.

The government typically coordinates with the Ministries of Coal, Power and Railways to monitor supplies and facilitate coal movement to power plants.

While such emergency support can help protect consumers and maintain grid reliability, industry officials said repeatedly extending such assistance to generators that have failed to adhere to stock norms could disadvantage plants that have maintained disciplined inventory levels.

“Emergency support to errant generators not adhering to norms can protect consumers and grid reliability, but it would come at the cost of producers that have complied with the norms,” an executive said. Such a system, the executive added, could weaken incentives for generators to undertake prudent fuel planning.

The issue also has a legal dimension. In a September 2025 judgment in Haryana Power Purchase Centre & Others v. GMR Kamalanga Energy Ltd., the Supreme Court rejected claims by individual distribution companies seeking preferential access based on the dates of their Power Purchase Agreements or the stated source of coal. The court also held that additional costs arising from the use of costlier coal should be shared equitably among procurers.

“The ruling reinforced the need for a predictable, common framework rather than preferential claims,” the executive said.

Industry stakeholders believe India may not need another overhaul of its coal-allocation architecture, but should focus on stricter implementation of existing norms, greater accountability and differentiated treatment for generators that repeatedly fail to maintain prescribed inventories.

“Plants facing genuine disruptions should receive timely support, while persistent inventory shortfalls should trigger a defined corrective mechanism,” an analyst said.

“As renewable capacity expands, energy security will depend not only on coal production but also on whether generators plan ahead and maintain adequate stocks. Emergency intervention must protect grid reliability without turning prudent inventory management into a liability,” the analyst added.

Published - August 18, 2026 08:43 pm IST