India Needs Policy Cohesion and Coal Supply Efficiency for Economic Growth

New Delhi – India faces a significant challenge in balancing economic growth with energy affordability, requiring a coordinated approach to policy and operational efficiency. Addressing inefficiencies within the coal supply chain is a critical first step, alongside broader reforms aimed at optimal energy use.

Policy Cohesion is Key​

The Ministry of New and Renewable Energy (MNRE) has recently advocated for a greater role in electricity sector policy formulation, aligning with its remit. However, deeper consultation with the Ministry of Power (MoP), the sector’s anchor ministry, is essential. Solar projects, for example, have experienced difficulties despatching electricity due to inadequate evacuation facilities, a responsibility primarily under the MoP’s purview.

Inter-ministry engagement must be overseen by the executive branch. The MNRE’s request to directly engage the sector’s regulator for directives is not appropriate, as grid responsibility remains firmly with the MoP and regulatory orders should maintain consistency. Policy cohesion is now more critical than ever, particularly given the need for integrated energy planning, effective subsidy management, and appropriate regulation.

Coal Sector Challenges and Solutions​

The coal sector currently accounts for over half of India’s primary energy mix, supplying over 70% of the nation’s electricity. Coal constitutes more than 70% of the cost of power generation, creating a burden that needs to be addressed to facilitate lower consumer tariffs. Several avenues exist for cost compression.

A significant portion of India’s coal-powered plants are located far from coal mines, necessitating lengthy railway hauls. However, Indian Railways currently overcharges for coal carriage, using the revenue to cross-subsidize passenger travel. This practice needs to be revised. Furthermore, coal suppliers face inefficiencies due to the high ash content of Indian coal compared to imports, leading to increased freight costs and reduced plant efficiency.

To mitigate these issues, coal companies must invest in washeries to remove ash before dispatch, a currently underutilized capacity. The Railways should gradually increase sleeper-class passenger fares, a measure that has only been implemented twice in the past five years, with the last increase in December 2025, leaving fares approximately 45% below estimated costs.

Given the rising cost of road transport fuel, the political challenge of addressing these railway charges is considered manageable. The global oil sector disruption, coupled with rising coal prices following the war in West Asia, has led to increased coal demand as countries seek to cover oil shortfalls.

India has maintained stable coal prices, largely due to state-owned companies dominating domestic production. However, this embedded subsidy should be removed, with the funds redirected as financial incentives for electricity distribution companies to accelerate sector reforms.

The government should also actively promote coal gasification, a process that offers dual benefits: energy security and reduced carbon emissions. Utilizing gas derived from coal can help replace imports and contribute to India’s net-zero goals.