India's thermal power sector faces a perverse incentive: generators that maintain adequate coal inventories risk being penalised when limited domestic supplies are diverted to plants that fail to stock up.
The problem lies in emergency coal redistribution. When a plant falls below prescribed stock norms, Coal India diverts coal from compliant plants to keep it running and safeguard grid reliability. Industry warns this undermines the incentive to plan and maintain stocks.
Coal stock requirements are not new. The Central Electricity Authority's framework since December 6, 2021, mandates plant-specific stocking norms to strengthen fuel security. The broader supply framework - coal linkages, Fuel Supply Agreements - is meant to give certainty. The revised SHAKTI policy approved in May 2025 streamlined linkages into two windows: Window I for central and state utilities at notified prices, and Window II for others, including import-based plants, via auctions at a premium.
But fuel security depends on the entire logistics chain - production, loading, railway availability, transit, stockyard management. Emergency help, experts argue, should be reserved for genuine supply-chain disruptions like mine-side constraints, railway bottlenecks, or force majeure, not persistent shortages caused by inventory mismanagement.
"Coal inventory should be recognised as a system reliability service, with generators maintaining adequate or higher-than-normative stocks appropriately incentivised, while repeated shortfalls without genuine external causes should carry consequences," says Rajib Mishra, former MD of PTC India.
Data shows this is not a coal shortage at national level. India produced 1,047.52 million tonnes in FY24-25 and 1,040.08 MT in FY25-26. Cumulative production till July was 302.04 MT, with 354.7 MT dispatched. Stocks at thermal plants were 34.55 MT, plus 113 MT at pitheads or in transit - around 148 MT total. The challenge is efficiently allocating, transporting and converting that into plant-level inventory, as electricity demand soars and thermal remains central to meeting peak demand.