As the world turns its back on fossil fuels, Coal India faces a reckoning

India's largest supplier of coal is pivoting to boost its renewable energy output. It will need to cut its operating costs first, and increase coal output to keep the numbers up

The current financial year is turning out to be one of reckoning for the 50-year-old Coal India Ltd (CIL).

 

The country’s largest coal miner has seen a drop in almost all of its key operational and financial parameters in the April-September period. Production has fallen 4 per cent to 329 million tonnes (MT), offtake dropped 3 per cent to 357 MT, overburden removal 3 per cent to 855 million cubic meters, revenue from operations 4 per cent to ₹66,029 crore, net sales 3 per cent to ₹58,790 crore, and profit after tax slumped 25 per cent to ₹12,997 crore.

 

For a company that meets around 80 per cent of the country’s domestic coal demand all by itself, these numbers are worrisome to say the least.

 

Recovery still possible

 

“We were among the top profit-making companies in the last two financial years (2023-24 and 2024-25) but this year, if you look at the H1 results, they are not encouraging,” conceded P M Prasad, who retired as Coal India chairman and managing director last month, in an address to employees on his last working day. That, incidentally, was also the company’s 51st Foundation Day.

 

“We have not done well in the first seven months of this financial year so far. We should not live on our past laurels, we have to live for the present and the future,” he noted.

 

Against a production target of 875 MT, CIL is struggling to cross even the 800 MT mark this year. The company attributes the slump to heavy rainfall in key mining areas, including coalfields in the South-eastern region. Prasad, however, sounded confident it would be ramped up over the next few months, an optimism borne out by Coal India's history of increasing production in the second half of every financial year.

 

Pushed against the wall

 

The production dip, however, is only a part of the problem. With the global push against fossil fuels gathering momentum, and India’s stated decision to gradually cut coal-use, the company is currently in the middle of an existential crisis. It has responded by increasing focus on non-coal areas of businesses, including, for example, renewable energy (RE).

 

Coal India is fast-tracking its solar energy plans and aims to scale up capacity to 3,000 megawatts (MW) over the next four to five years as part of a long-term energy transition move, said Prasad, noting this was a key element of the miner’s diversification strategy amid India’s broader shift towards cleaner energy.

 

The company’s renewable energy push is likely to cross the 1-gigawatt mark with major projects in Rajasthan and Uttar Pradesh, Prasad pointed out.

 

There is however, one major problem: Time.

 

CIL’s business diversification plan started only four years ago in the true sense, with the setting up of a dedicated department under then chairman Pramod Agarwal. But the strategy is falling into place only now.

 

According to Prasad, the next 5-10 years are likely to be challenging as the miner moves away from a business with 100 per cent coal-based revenue to non-coal sources of revenue. As far as RE is concerned, Coal India's efforts appear to be significantly behind the curve. Consider, for instance, the fact that Neyveli Lignite Corporation (NLC India), the state-owned miner of lignite and which is much smaller than CIL, already has 1,400 MW of operational RE capacity, as against CIL's 260 MW.

 

Costs a drag

 

Coal India’s problems do not end here. A close look at the company's performance numbers for the first half of financial year 2025-26 reveals a major issue: high employee costs that are pushing up operational expenses. The company reported a 5 per cent jump in total expenditure at ₹52,315 crore for the six months ended September 2025. Employee benefit expenses accounted for as much as 40 per cent, or ₹21,679 crore, of this, a 2 per cent increase over the same period last financial year.

 

“I do not think a dip in production is a major issue for Coal India at this moment. In the remaining period of the current fiscal year, I am sure they will be able to take it up to at least the last year’s level. Even energy transition is more of an ambitious goal given the company’s main mandate to meet coal demand,” former CIL chairman Singyapally Narsing Rao said. 

 

“The real issue is the high employee cost. With 70 per cent of their operations outsourced, why should employee costs account for 25 per cent of the cost of production? The company should introspect on this.”

 

Rao said Coal India should aim for leaner operations, given that coal demand is set for a decline in the near future, besides rising competition from private players. The impact of the high employee benefit expense on CIL’s balance sheets can be gauged from the fact that profitability dipped in the first half of 2025-26 despite average per-tonne realisation remaining flat at ₹1,649 and overall sales quantity dropping by a minor 3 per cent to 356 MT.

 

Winning bids

 

However, all is not lost yet for CIL. It has quickened its pace of diversification and has been on the lookout for critical minerals assets, including lithium, graphite, cobalt, nickel and rare earths. It has already made early moves in critical minerals exploration within India. In June this year, it signed a memorandum of understanding with Hindustan Copper to collaborate in copper and critical minerals.

 

It has also emerged as the preferred bidder for the Oranga-Revatipur graphite and vanadium block in Chhattisgarh and been declared preferred bidder for the Khattali Chhoti graphite block in Madhya Pradesh. These efforts, along with the 3,000 MW solar capacity addition plan, are expected to show results soon. 

 

As Prasad said: “Given a strength for the test, CIL has always done extremely well whether it is the Corona time or transitioning from loss-making to profit-making business.”

 

Canary in the Coal Mine

 

• In H1FY26, Coal India's production dropped 4 per cent to 329 mt
• The revenue dropped 4% to ₹66,029 crore
• Profit after tax dropped 25% to ₹12,997 crore.
• Drop in operational and financial performance comes amid calls for energy transition, moving away from fossil fuels
• High manpower cost pushing operational expenses, with CIL reporting a 5% jump in total expenditure at ₹52,315 crore for H1
• Profitability dipped in the first half of FY26 despite average per tonne realisation remaining flat at ₹1,649
• CIL has of late quickened pace of diversification focusing on solar and looking for critical minerals assets