By New Delhi: India’s ambitious plan to expand its coal power generation capacity is facing significant roadblocks, including a lack of willing builders, rising costs, and dwindling investor interest. These challenges threaten the country’s ability to meet its growing energy needs, particularly during peak summer months when power demand soars and blackouts become widespread.
India, the world’s third-largest energy consumer, had set an ambitious target of adding 15 gigawatts (GW) of new coal power by March 2025. However, due to multiple setbacks, it is likely to commission only half of that capacity, according to government officials interviewed by Bloomberg News. This shortfall marks a continuation of a trend, as India also failed to meet its coal capacity expansion targets in the previous two years.
Global Coal Backlash Impacts India’s Plans
India’s coal power expansion efforts have been hampered by the global movement against coal, which has discouraged investment in fossil fuel-based energy projects. Over the past decade, environmental concerns and the push for renewable energy have made coal a less attractive option for financial institutions and private companies. As a result, many key equipment suppliers exited the market, leaving India with only two major domestic suppliers for vital machinery: Bharat Heavy Electricals Ltd. (BHEL) and Larsen & Toubro Ltd. (L&T).
Even L&T, which had been shifting its focus away from coal, had to be convinced by the government to continue participating in power plant projects, officials said. Global suppliers such as General Electric Co. and Toshiba Corp. have stopped taking new orders for coal plants, further narrowing India’s options.
L&T’s President for Energy, Subramanian Sarma, stated that the company is willing to help India meet its power generation goals but emphasized the need for a clear and long-term government plan. “If there is a sound forward-looking plan and good visibility on how the market is going to evolve, then we can always match the required demand,” he said. Meanwhile, BHEL and the Ministry of Power have remained silent on the issue.
Rising Costs Discourage New Investments
The lack of competition in the market has already had a significant impact on project costs. Recent tenders issued by NTPC Ltd., India’s largest power producer, suggest that the cost of setting up new coal-fired power plants has risen to ₹130 million ($1.5 million) per megawatt (MW)—an increase of more than 50% compared to 2023 estimates. These escalating costs are deterring energy firms from placing orders for new plants.
For instance, Madhya Pradesh Power Generating Co. is currently in negotiations with BHEL to lower the price of a planned power project near Amarkantak. According to sources, BHEL was the sole bidder for the project and quoted prices well above what the company was willing to pay. This highlights the challenges power developers face when attempting to expand India’s coal fleet amid rising costs and limited supplier options.
Historical Challenges and Import Restrictions
India’s current predicament is partly rooted in past economic and geopolitical developments. A decade ago, slow economic growth and low power demand forced several domestic suppliers to exit the coal power sector. The situation worsened when the COVID-19 pandemic further disrupted supply chains and reduced new project investments.
By the time the Indian government turned its attention back to coal in response to post-pandemic power demand surges, the geopolitical landscape had shifted. A deadly border clash between India and China in 2020 led the Modi government to ban the import of power equipment from China, one of India’s key suppliers of boilers, turbines, and power plant financing.
Since the ban, India has been forced to look to other countries for essential power plant components. Specialized equipment, such as boiler pipes and ducts, now comes from Germany and Italy, adding to longer delivery times and increased freight costs. This has further contributed to project delays and rising expenses.
Infrastructure Challenges Beyond Power Plants
The difficulties in coal power expansion extend beyond power plant construction. Infrastructure components such as water connectivity, cooling towers, coal and ash handling systems, and pollution control scrubbers require contractors with specialized expertise. However, India currently faces a shortage of such contractors, delaying progress and raising concerns about long-term feasibility.
Renewables Gain an Edge Over Coal
While India has seen rapid growth in renewable energy installations, these have not been sufficient to meet the country’s increasing electricity needs. Recognizing this, the government announced plans in 2023 to add nearly 90 GW of coal power capacity over the next decade. However, the challenges surrounding coal are making renewable energy a more attractive alternative.
According to Sunil Dahiya, founder of EnviroCatalysts, a New Delhi-based environmental advocacy firm, the rising cost of coal power could accelerate India’s transition toward green energy.
“If coal projects continue to be built at these prices, we could see a new wave of stranded assets in the power sector,” Dahiya said. “When the economics don’t support a form of energy, a drastic shift occurs. We are at that moment now.”
India’s reliance on coal for its energy security is facing major setbacks due to equipment shortages, rising costs, and geopolitical restrictions. Although the government remains committed to coal expansion, the high price tags and operational difficulties may force a rethink of energy strategies.
As the cost of coal-fired power continues to rise, renewables such as solar, wind, and hydroelectric energy may become the preferred alternative. Whether India can balance its immediate energy needs with long-term sustainability goals remains to be seen, but the current situation underscores the urgent need for a well-planned energy transition strategy.
For now, India finds itself at a crossroads—stuck between its traditional dependence on coal and the growing economic appeal of renewable energy sources. The choices made today will determine the future of India’s energy security for decades to come.
