India’s energy ecosystem is beginning to show early signs of stress amid ongoing geopolitical disruptions in West Asia, even as the government maintains that the country remains well-prepared to manage emerging challenges.
The conflict in the region has disrupted global energy supply chains, particularly affecting shipments through the Strait of Hormuz, a critical route for India’s imports of crude oil, natural gas and fertilisers. Addressing Parliament on March 23, Prime Minister Narendra Modi described the situation as ‘concerning,’ acknowledging its impact on the global economy and everyday life while assuring that India is taking proactive steps to safeguard its energy security.
Industrial clusters across the country are already experiencing localised stress, with disruptions in CNG and LPG supplies forcing businesses to explore alternative fuels such as coal. India imports nearly 45–50% of its natural gas requirement in the form of LNG, making industrial consumers particularly vulnerable to global supply shocks and shipping uncertainties.
While the government has emphasised that India’s energy resilience has improved significantly over the past decade through diversification of import sources, expansion of strategic reserves and stronger supply chain preparedness, the industrial sector continues to feel the pressure.
Gas-based power plants remain heavily underutilised, operating at below 25% plant load factor (PLF), as coal and renewable energy dominate the power generation mix. This has insulated the power sector to a large extent, but industries dependent on gas are facing increasing constraints.
In this context, coal has re-emerged as a critical fallback, reinforcing its role as the backbone of India’s energy security. The country’s coal demand has been steadily rising, with annual consumption crossing 1.25 billion tonnes, driven by sectors such as power, cement, sponge iron and captive industrial users.
Market signals point to tightening demand-supply dynamics. E-auction premiums from Coal India Limited rose to around 35% above notified prices in February 2026, reflecting growing urgency among buyers to secure supplies. This marks a shift from softer demand trends observed earlier in the fiscal year.
The demand surge is being driven by multiple factors, including substitution from gas amid LNG disruptions, seasonal increases in power demand and reduced coal imports leading to greater reliance on domestic production. However, coal’s substitution potential remains limited in sectors like fertilisers and chemicals due to structural and technological constraints.
Commenting on the evolving scenario, Vinaya Varma, MD & CEO of mjunction services limited, said, “What we are witnessing is an early but clear behavioural shift in fuel consumption patterns. As LNG availability tightens and CNG/LPG supplies face disruption in several industrial clusters, buyers are increasingly turning to coal to ensure operational continuity. The rise in e-auction premiums reflects this urgency.”
Despite these pressures, the situation remains under control. Only about 47% of auction volumes have been sold so far this year, and premiums remain below historical peaks, indicating firm but measured demand. Additionally, coal stock levels at power plants remain comfortable at 18–20 days of consumption, helping prevent panic buying.
