Upgraded 23 May 2026 at 17:53 IST
This is India’s energy paradox, and it costs the nation someplace in between US$ 15 and US$ 20 billion in forex every year.
Coal mined in Kalimantan, Indonesia, is packed onto a bulk provider, cruises 3,500 km throughout the Indian Ocean, unloaded at Hazira port, expenses approximately 5,500 per tonne to regional customers. A tonne of lignite dug from Gujarat’s own ground and carried 250-300 km to Surat expenses around 4,200-4,400 provided. The space is annoyingly narrow. In some grades, imported coal has actually currently crossed over to being less expensive.
This is India’s energy paradox, and it costs the nation someplace in between US$ 15 and US$ 20 billion in forex every year.
India is the world’s 3rd biggest coal manufacturer, holds the 4th biggest reserves in the world – over 360 billion tonnes by geological quotes (Ministry of Coal) – and produces over a billion tonnes yearly. We imported roughly 260 million tonnes in FY2024-25, a substantial share of which was thermal coal: the exact same classification we hold in abundance. In result, we are paying a premium to import what we currently own. In a world racing towards energy sovereignty, this is not simply a financial inadequacy; it is a tactical vulnerability.
3 structural forces produce this paradox.
Force no. 1: Geography does not appreciate economics
India’s coal deposits are focused in the East – Jharkhand, Odisha, Chhattisgarh, West Bengal, Madhya Pradesh – while commercial need is focused in the west and south, consisting of Gujarat, Maharashtra, Tamil Nadu and Andhra Pradesh. As soon as mined, it needs to take a trip 1,200-1,800 km by rail to reach factories in these states.
At existing freight rates of about 1.60-2.00 per tonne per km for coal (Indian Railways Annual Report & & Accounts 2024-25; DPIIT Logistics Cost Assessment, 2025), freight alone equates to 1,900-3,600 per tonne throughout a 1,200-1,800 km journey before the coal even reaches the factory gate. Include roadway transportation, dealing with losses and transit time, and the Indonesian coal begins appearing like the reasonable business option.
Force no. 2: A mining performance space we have not closed
Indonesian coal exits the mine more affordable due to the fact that of exceptional extraction effectiveness. Removing ratios in Kalimantan are as low as 3:1; in numerous Indian deposits, they reach 15:1, suggesting moving 5 times more earth for the very same tonne of coal.
This is an innovation space, not a geological one. In Australia, ‘cast blasting’ and strolling draglines get rid of the pricey double-handling of earth. India’s mines still rely mainly on traditional truck-and-shovel approaches. The ground is not the restriction; the technique of working it is.
Force no. 3: The logistics facilities we never ever constructed
If location is the core difficulty, the service should concentrate on moving coal inexpensively throughout 1,500 km. India has actually attempted to resolve this practically totally through trains, which are filled, pricey, and operationally sluggish for bulk freight.
What India has actually not seriously tried is river transportation. The Mahanadi, streaming through the heart of Odisha’s mining belt, is a designated nationwide waterway. The Godavari and the Ganga passage link to eastern mines. Inland waterway transportation worldwide costs 0.20-0.50 per tonne per km compared to 1.60-2.00 by rail (DPIIT Logistics Cost Assessment, 2025). While facilities financial investment is considerable, however it is a one-time expense for a life time of cost savings.
River freight at scale is not an unique concept. China and the United States have effectively leveraged inland waterways to move countless tonnes of coal and develop big commercial economies. India, on the other hand, is yet to take advantage of National Waterway 5 on the Mahanadi-Brahmani system.
3 levers. Gathered.
The course out needs synchronised action, not consecutive pilots.
– First, the efficiency space in domestic mining will not close through financial investment requireds alone. Miners require to deal with cost-competitive pressures that drive innovation adoption. Today, domestic item discovers a captive purchaser despite extraction effectiveness, leaving little reward to enhance expense competitiveness. Mining agreements and efficiency structures need to reward provided expense performance.
– Second, inland waterways require to be established as major commercial logistics passages. Designating coal as a top priority freight classification, constructing river-terminal facilities on the Mahanadi-Godavari system, and developing practical public-private funding designs for barge operations would enhance shipment economics within India.
– Third, rail freight rationalisation need to follow. Extending devoted freight passages to seaside commercial clusters and reorganizing coal freight tariffs would tilt the delivered-cost formula in favour of domestic supply. The forex cost savings from lowered imports would money these financial investments often times over.
Our continued reliance on imported thermal coal is an option camouflaged as a restraint. The reserves remain in the ground. The rivers circulation in approximately the best instructions. The organizations efficient in action – Coal India, MoPSW, DFCC – currently exist and are moneyed.
By incorporating these 3 levers, we can lastly decouple commercial development from imported coal and change a buried property into a pillar of energy sovereignty.
The shift from being a leading importer to an energy-independent powerhouse is no longer a matter of geological luck, however of logistical and functional will.
This post is composed by Ankush Sheth, Partner, Vector Consulting Group.