CIL’s production is seasonal but thermal power demand was low through FY26 due to extended monsoons, rising share of renewable energy (RE) contributions, and also increased contributions from captive miners.
The company reported production of 84.5 mt in March, up 13.1 per cent M-o-M but down 1.5 per cent Y-o-Y. Subsidiaries Mahanadi Coalfields Ltd (MCL) and Western Coalfields Ltd (WCL) both disappointed, leading to production declines. Offtake was 69.5 mt for March, up 12.1 per cent M-o-M and up 0.7 per cent Y-o-Y, and it was 744 mt for FY26, down 2 per cent Y-o-Y versus 759 mt in FY25. CIL has a 1 billion mt (bmt) volume target, and it will be looking to boost production from FY26 levels to 815 mt in FY27, and maintain 5 per cent production growth in future, assuming power demand grows at 6-7 per cent.
India’s power demand was flat (up 0.5 per cent Y-o-Y) during April 2025-February 2026. Captive production rose 12 per cent Y-o-Y during the same period, with the share of captive coal in total volumes up 222 basis points (bps) to 20.9 per cent in the 11 months of FY26. RE contributed 26 per cent to total generation against 21 per cent for the same period in FY25.
For Q4FY26, CIL’s adjusted operating profit may fall by 8-9 per cent Y-o-Y to ₹10,200 crore due to lower e-auction realisations and high coal inventories at plants. For FY26, adjusted operating profit growth may be in low single digits.
The market share trend is down from over 82 per cent in FY20 to around 73 per cent in the first 11 months of FY26 as captive and merchant miners raised their production to 194 mt (up 9 per cent Y-o-Y). Given captive production is still ramping up, more loss of share is likely.
Coal inventories at power plants are high. CIL’s own inventory is at a record high of 143 mt. On the e-auction front, despite geopolitical tensions and Indonesia’s production caps, upside was limited. While inventories are at current levels, e-auction gains could remain limited. This could change if the Iran war leads to sustained increase in global coal prices. The impending wage revision in FY27 could also put some pressure on earnings.
A slowdown in renewables capacity additions, or a substitution of gas in certain industrial processes could push demand for coal. Of course, higher growth in power demand would also lead to growth in coal demand, since thermal remains the key base-load component of the energy mix.
The Central Electricity Authority (CEA) projects peak demand at 363 gigawatts (Gw) by FY30, backed by over 40 Gw of additional thermal capacity. This implies a long-term trend of higher CIL offtake in absolute terms, even if market share erodes. Also, industrial metals and cement, which are energy-intensive sectors, are ramping up capacity, and this may drive demand. By 2030, domestic demand should be about 1.3 billion tonnes (bt), which leaves ample headroom for 1 billion production output from CIL.
The company is looking to boost e-auction volumes. In FY25, e-auction sales stood at 79 mt, about 10 per cent of dispatches and at a 68 per cent premium over FSA (fuel supply agreement). Management looks to increase e-auction offtake to 15-20 per cent of production by measures such as directly allowing buyers from Bangladesh, Bhutan, and Nepal. Subsidiaries have been asked to offer up to 40 per cent of production for e-auctions.
CIL is also trying to increase coal-washer capacity to improve its share in domestic coking and non-coking coal. It is expanding its mining operations and may consider raising debt to undertake diversification into RE and coal gasification.
The FY26 underperformance may have been an outlier due to the weather. A mid-single digit rise in volumes may be the trend through the medium term. Higher realisations through e-auctions, and better cost controls are both imperatives.
CIL’s shares fell on Wednesday on hopes of easing geopolitical tensions. But the stock has risen over 15 per cent in the past three months on expectations of summer demand and support from high prices.
 "Coal, Coal India")