India's Industrial Coal Surge Undercuts Two Years of Power-Sector Emissions Progress
Clean energy held India's power emissions flat for two years, but accelerating heavy industry and an LPG shortage are pushing coal consumption sharply higher outside the grid.
Coal consumption in India outside its steel, cement and power sectors grew 14% in the first half of 2026, up from 3% in the same period a year earlier, as an LPG shortage pushed factories and households toward solid fuel. Carbon Brief reported those figures on Wednesday (2026-09-16), arriving just as analysts had been crediting India's power sector with two consecutive years of flat emissions — a milestone driven by rapid renewable deployment.6
The divergence matters for anyone tracking India's commodity import trajectory and its long-run effect on seaborne coal markets. Newcastle coal physical was quoted at $139.05 per tonne on Thursday (2026-09-17). A sustained shift toward coal in Indian industry, stacked on top of 43 gigawatts of coal-fired generating capacity still under construction at end-June, complicates any thesis that Indian thermal coal demand has peaked.6
The LPG shortage driving some of this substitution connects directly to Strait of Hormuz disruptions that rattled India's energy supply chain earlier this year. Nearly half of India's fossil fuel imports transit through the strait, according to The Hindu, and the disruption forced rapid procurement reshuffling. India's crude oil imports rose 7.5% and LNG imports jumped 16% in May versus April, with the country's total oil and gas import bill hitting $18.7 billion in May — up 81.6% from $10.3 billion in May 2025, according to provisional oil ministry data compiled by Indian media.5,2
Steel and cement output — both energy-intensive, both still largely coal-dependent — grew 8% and 9% respectively year-on-year in the first half of 2026, even as input costs rose and profitability came under pressure. That volume growth is feeding through to fuel-oil demand as well: Carbon Brief noted that supply of fuel oil to industry increased for the same reason that drove the coal shift, with industrial users substituting away from LPG wherever boilers and heaters permitted.6
The power sector itself tells a different story. Renewables accounted for 42.4% of India's installed power capacity by March 2026, up from just 0.72% in March 2005, according to The Hindu. Coal power generation in India fell 3.0% year-on-year — 46 terawatt hours — in 2025, the first simultaneous drop for both China and India in half a century, with non-fossil energy covering all of India's consumption growth, per Carbon Brief's earlier analysis. That achievement is real. But it is a power-sector story. The rest of the economy is moving differently.2,1
India's total energy investment is set to reach a record $170 billion in 2026, driven by solar installations and oil refining expansion, the IEA said in its World Energy Investment report. The headline figure is striking. But the composition matters: refining expansion means India is building capacity to process more crude, and solar investment, while substantial, has not yet displaced industrial fuel demand in sectors where intermittent electricity is a poor substitute for direct heat.3
On steel specifically, India has a stated target to reduce average CO2 emissions per tonne of output by 25% by 2025-26, mainly by shifting away from coal-based steelmaking. Given that steel output grew 8% in the first half of 2026, meeting that intensity target while volumes expand at this pace would require an aggressive simultaneous shift in production methods — a combination that has not materialized in the data so far.6
The Hormuz dimension adds a procurement overhang to all of this. Indian refiners reportedly held roughly two months of crude stock as of mid-June, reducing their urgency to return to Middle Eastern barrels even after the strait reopened, OilPrice.com reported in June (2026-06-19). That buffer provided breathing room in the short run. Over a longer horizon, the Atlantic Council flagged the India-Middle East-Europe Economic Corridor as a potential alternative routing that could eventually reduce Hormuz exposure — though that infrastructure project remains years from operational.5,4
Dubai crude was quoted at $118.84 per barrel on Thursday (2026-09-17), well above ICE Brent front-month at $104.29. That spread reflects ongoing Middle Eastern supply tightness, and it makes the cost arithmetic for Indian refiners dependent on Gulf barrels materially worse than headline Brent suggests. Higher crude costs feeding through to petrochemical and LPG prices are part of what is sustaining the coal substitution dynamic in Indian industry.5
How coal consumption in India's non-power industrial base evolves through the second half of 2026 is the figure worth tracking. If LPG supply normalises and Hormuz flows stabilise, some of the 14% coal surge may reverse. But with 43 gigawatts of coal-power capacity still under construction and heavy industry running hard on solid fuel, the clean-energy gains in India's grid are increasingly offset by demand growth the grid does not yet reach.6