India remains one of the most important drivers of global coal demand, but the structure of its consumption is changing. According to the International Energy Agency (IEA), India’s total coal demand in 2025 is expected to edge down slightly year on year, even as industrial use strengthens and becomes the main source of growth.
Slight dip in overall coal consumption in 2025
India’s total coal consumption in 2025 is forecast to decline by about 1.2 percent, falling by 16 million tonnes to 1,297 million tonnes. This marginal reduction reflects lower coal-fired power generation rather than a structural weakening of coal demand across the economy.
Coal-fired power generation eases amid strong monsoon and renewables
Coal use in the power sector is expected to fall by around 3 percent in 2025. Higher hydropower output, driven by an early and prolonged monsoon season, reduced electricity demand for cooling and continued expansion of solar and wind capacity all contributed to the decline. Even so, coal remains the backbone of India’s electricity system, with power generation accounting for an estimated 940 million tonnes, or about 73 percent of total coal consumption.
India continues to expand both coal and clean power capacity
As of August 2025, India’s installed power generation capacity stood at 495 GW. This includes 223 GW of coal-fired capacity, plus around 30 GW of captive coal plants, alongside 123 GW of solar, 52 GW of wind and 42 GW of hydropower. While the government is pushing toward its target of 500 GW of non-fossil capacity by 2030, India still commissioned or began trial operations at 20 new coal-fired power plants totaling 14 GW in 2025, with more capacity under construction.
Coal’s share of the power mix to fall by 2030
Despite new coal additions, the share of coal in India’s electricity mix is projected to decline from around 70 percent in 2025 to about 60 percent by 2030. Rising renewable and nuclear generation is expected to slow the growth of coal-fired power, even as overall electricity demand continues to increase.
Industry becomes the main source of coal demand growth
Non-power coal demand is the key growth area in 2025. Strong infrastructure development and steady expansion in cement and steel production are supporting higher industrial coal use. The IEA highlights that industrial activity, rather than power generation, is now driving incremental coal demand.
Cement sector boosts thermal coal use
India, the world’s second-largest cement market, is expected to see cement demand grow by 5 to 6 percent in 2025. Capacity expansion by major producers such as Ultratech, Adani and Dalmia is keeping coal consumption elevated. Cement producers have also shifted from petroleum coke to thermal coal, supported by favorable pricing and tax changes, including a higher goods and service tax on petcoke and the removal of the coal cess of INR 400 per tonne.
Steel production supports both thermal and metallurgical coal demand
Steelmaking, particularly coal-based direct reduced iron production, continues to underpin coal demand. Projects such as Jindal Steel and Power’s coal-to-DRI facility in Odisha have received government incentives under India’s national coal gasification strategy. At the same time, metallurgical coal demand is expected to rise to about 85 million tonnes, driven by strong steel output growth and new blast furnace capacity.
Coal gasification gains policy support
Coal gasification is emerging as a strategic priority for India. The government is targeting 100 million tonnes per year of coal gasification capacity by 2030, supported by financial incentives initially totaling USD 1 billion and an additional USD 6 billion announced in November 2025. Companies including GAIL, Coal India, Adani and Jindal have expressed interest, although uncertainties remain around the economics and technical feasibility of gasifying high-ash coal.
Non-power coal demand set to rise sharply by 2030
The IEA estimates non-power coal consumption at 356 million tonnes in 2025, rising to about 470 million tonnes by 2030. Industrial growth, fuel switching and gasification projects are expected to drive this increase, lifting the share of non-power coal in India’s overall demand mix.
India’s coal demand outlook to 2030
Overall, India’s coal demand is projected to grow by around 17 percent by 2030, reaching about 1,522 million tonnes. While coal use in electricity generation continues to rise more slowly due to renewables, industrial coal demand is taking a larger role, reinforcing coal’s importance in supporting India’s economic and industrial expansion through the end of the decade.
Baburajan Kizhakedath