September’s GST restructuring delivered unexpected relief for India’s coal sector. While raising the base rate from 5% to 18%, the government eliminated a ₹400 per tonne cess, creating a net reduction of ₹180 per tonne from September 22.
Coal India, which supplies 80% of domestic production, stands to benefit most from improved price competitiveness against imports. The state miner produced 703mn tonnes in FY2024 while India imported 261mn tonnes, primarily higher-grade coal for steel production and thermal generation.
The reform reflects New Delhi’s balancing act between climate commitments and energy security. Coal still generates 70% of India’s electricity, and demand continues rising alongside industrial expansion. Rather than accelerating coal’s decline, the government chose to support domestic production while renewable capacity scales up.
Environmental groups criticised the move as contradicting India’s net-zero pledges. However, officials argue coal remains essential for grid stability during the transition period, with demand projected to peak only in the 2030s as storage technology improves.