April 22, 2026 - India’s coal production growth turned negative for the first time since the pandemic, even as output contracted in March, a rare occurrence for the month in over a decade, signaling emerging supply-side and pricing pressures in the sector, analysts said.

A Business Standard analysis of historical data shows that coal output has not declined in the month of March since at least 2013, underscoring the significance of the latest contraction.

Data released by the Commerce Ministry on Monday showed coal output declined 0.5 percent in 2025-26 and fell 4 percent year-on-year in March. The annual decline marks the weakest performance since 2020-21, when production had shrunk 1.9 percent amid Covid-related disruptions.

Analysts attributed the decline primarily to production shortfalls. “The decline in coal output is largely due to production shortfalls, with major producers like Coal India missing their targets during the year,” said Rajib Maitra, partner and sector leader at Deloitte South Asia.

Coal India, which accounts for around 80 percent of domestic production, also reported a fall in output. Data released earlier this month showed its production declined 1.7 percent in FY26 and 1.5 percent in March.

High inventory levels further reduced the need for fresh production. “Coal India is currently estimated to be holding over 100 million tonnes of stock, suggesting part of the demand may have been met through inventory drawdowns,” Maitra said.

Coal prices have also softened sharply over the past year, both domestically and globally, weighing on production incentives. “Coal prices have come down significantly from their peak levels, both domestically and globally,” Maitra said, attributing the decline to improved supply conditions and the rising share of renewable energy, which has moderated demand growth at the margin.

He also pointed to evolving consumption patterns within the industry. “In some cases, sectors such as cement are moving away from captive thermal power and sourcing electricity from the grid, which increasingly includes renewable energy,” Maitra said, adding that such shifts could moderate incremental coal demand.

Despite the decline, experts said underlying demand remains intact. “I do not see a structural reason for coal demand to decline. Consumption across power and industrial sectors continues to remain strong,” said Amit Bhargava, national leader, metals and mining, KPMG in India.

Bhargava cautioned against interpreting the data as a demand slowdown, pointing instead to inventory dynamics. “Before drawing conclusions, it is important to look at inventory levels. There could have been a build-up earlier, and companies may now be drawing down stocks instead of producing more,” he said.

Taken together, analysts said the contraction reflects a mix of production shortfalls, inventory drawdowns and weaker pricing dynamics, rather than any broad-based decline in underlying demand.