India’s coal sector investment is expected to grow by almost 10 per cent y-o-y to around $15 billion, or roughly ₹1.25-lakh crore, in the current calendar year as the country prepares to meet demand due to rising electricity consumption and expanding industrial base.

According to the International Energy Agency (IEA), investments in the coal sector by the world’s second largest producer and consumer has been growing consistently since 2021 with the annual rate of growth in investments expected to double in 2024 compared to 2023.

The agency in its world energy investment report 2024 anticipates that efforts by the world’s third largest energy consumer to ramp up coal production will fall short of meeting the demand for the critical commodity with reliance on imports increasing.

Aided by an expanding industrial and commercial base, as well as growing electricity consumption, which is appreciating at about 10 per cent annually, India’s appetite for coal has risen substantially in the past decade.

Investments in coal

The IEA pointed out that the government announced plans to increase domestic production to meet rising demand and investment, which has been growing steadily since 2021.

“Investment increased by 5 per cent in 2023 and is set to expand by nearly 10 per cent in 2024 to around $15 billion. The Ministry of Coal is relying on a series of measures to boost coal supply, including commercial auctions with a revenue share mechanism, allowances for the sale of additional coal production and rolling auctions,” it revealed.

Nonetheless, based on current trends, demand is set to rise faster than supply, which means India could soon overtake China to become the world’s largest coal importer, it added.

Clean energy investments rising

The IEA pointed out that India’s clean energy investments have grown fast in the past three years in response to ambitious clean energy targets.

India has been pursuing a range of decarbonisation and diversification strategies, particularly setting a target for reaching net zero emissions by 2070. The initiatives have led to a surge in Indian clean energy investment in recent years.

“Spending reached $68 billion in 2023, up by nearly 40 per cent from the 2016-2020 average. Almost half of this was devoted to low-emissions power generation, which includes solar PV. Fossil fuel investment grew by 6 per cent over the same period to reach $33 billion in 2023, in response to rising demand for fuel and coal-fired power generation,” it added.

Clean energy investment is on track to double by 2030, under today’s policy settings, but would need to rise by a further 20 per cent to get fully on track for the country’s energy and climate goals. Addressing risks that push up the cost of capital will be critical in this endeavour, it emphasised.