Why does India have a coal shortage?

It’s a combination of a sharp uptick in power demand as the economy recovers from the Covid-19 pandemic and supply issues. 

But there are also other reasons, experts say. One is related to South Asia’s monsoon season, which records heavy rainfall from June to August every year, limiting coal mining and its transportation across the country. 

“They shut down their mining operations during this rain season,” says Shreya Jai, a New Delhi-based Indian journalist. In September, India continued to receive a lot of rain, keeping the country’s mining industry largely shut.

Another crucial reason is related to payment issues, according to Jai. In August, four large Indian states with the biggest coal consumption defaulted on their dues to Coal India, which is the world’s largest coal-producing company. Coal India is also a regulating force for coal prices.

Jai also draws attention to the fact that while much of India’s coal production, around 80 to 85 percent, has a domestic origin, the country also imports coal. But when coal prices soared, imports were stalled, creating “an additional pressure” over the domestic coal-based power units, she says.