India’s electricity sector continues to rely heavily on coal imports, with 20 percent or about 206 million tonnes (MT) of thermal coal imported in 2023-24 for $21 billion. Over the past decade, between 2013 and 2023, thermal coal imports have increased by 58 percent, and the dollar value of these imports has surged by 124 percent. This is largely due to volatile coal prices and the depreciation of the rupee. Coal imports particularly spike during the summer months when electricity demand rises sharply because of increased cooling needs.
National electricity demand in India is on a steady and strong rise, fueled by urbanization, industrial growth, and higher adoption of electric technologies. Hotter summers, intensified by the worsening climate crisis, are also contributing to this surge. Per capita electricity consumption rose from 957 kilowatt-hours (kWh) in 2013 to 1,331 kWh in 2022, indicating that summer demand for electricity will continue to grow in the coming years.
India’s dependence on imported coal poses both physical and financial risks. Physical risks include disruptions in the coal supply caused by political changes or natural disasters. Financially, the volatility in energy prices affects both power producers and consumers. While the quantity of thermal coal imports rose by 58 percent between FY 2013 and 2023, the cost increased by 124 percent, contributing to energy inflation and rupee depreciation. Although there has been significant growth in domestic coal production and renewable energy (RE) development over the last five years, these efforts have not led to a decrease in coal imports.
Seasonal trends show that coal imports rise between April and June, by around 10 to 35 percent compared to non-summer months. This is mainly to meet the electricity demand driven by cooling requirements. A focused shift toward renewable energy sources like solar and wind, supported by energy storage systems, could deliver cheaper, more reliable power while reducing macroeconomic risks and conserving foreign exchange reserves.
In 2023-24, India updated its renewable energy targets to reach 500 gigawatts (GW) of non-fossil energy capacity by 2030. The country plans to add 50 GW of renewable capacity every year until 2027-28. Currently, India has around 151 GW from solar and wind, and about 200 GW when including hydro and other sources. In FY 2025, India achieved the highest-ever annual addition of 24 GW of renewable capacity.
During the summer months of 2024, an additional 2.65 MT per month of thermal coal was imported to meet the spike in electricity demand. This extra coal generated about 4.8 billion units of electricity monthly. To replace this with renewable energy, about 33 GW of new RE capacity would be required, a target well within India’s current annual goals. Such a move would save approximately $826 million every year on coal imports during the summer months alone. Extending the benefits throughout the year could save about $3.3 billion annually.
Eliminating thermal coal imports is challenging but achievable if India remains committed to its RE targets. In 2023-24, imported thermal coal contributed to about 30 percent of India’s total electricity generation. To replace this, an additional 236 GW of renewable capacity is needed, which is achievable within India’s planned 300 GW RE addition by 2030.
If India installs 50 GW of RE every year as planned, it could eliminate thermal coal imports by 2029. This would save around $66 billion between 2025 and 2029, and a cumulative $173 billion by 2034. Achieving these targets would not only result in major foreign exchange savings but would also significantly enhance India’s energy security and reduce reliance on imported .
