In the first half of October, coal inventories at Indian power plants experienced their most rapid decline in two years, according to an analysis of government data. Power plants' stockpiles fell by 12.6% to 20.58 million metric tons, marking the most substantial fortnightly drop since the second half of September 2021. These levels were the lowest since November 2021.

The unexpected decline in coal inventories was due to increased electricity demand driven by unusually dry weather and a rise in economic activity this month. Coal-fired power generation increased by 33% year-on-year, outpacing the 21.6% increase seen in September. Power utilities encountered a 20.4% increase in electricity demand and a 26.8% decrease in hydropower output, as reported by the federal grid regulator.

To compensate for the seasonal decline in power generation from renewable sources like wind and solar, India increased coal-fired power output. This shift resulted in a reduction of renewable energy's share in total output from 12.1% in September to 10.1% in the first half of October.

Despite the efforts of Coal India, the state-run dominant miner, which increased supplies to power plants by 6% year-on-year to 23.5 million tons between October 1 and October 15, coal stockpiles at power plants continued to decrease.

The rise in coal-fired power generation has led to an increase in imports, with shipments of thermal coal heading to India expected to reach 19.35 million tons in October, the highest level since June 2022, according to data from analytics firm Kpler.

In addition, natural gas-fired power generation in the first half of October nearly tripled to 1,993 million kilowatt-hours (kWh), up from 700 million kWh the previous year.

India's increased buying of seaborne thermal coal and liquefied natural gas has the potential to impact global benchmark prices, which have already benefited from Chinese demand in recent months.

The surge in power demand also resulted in more outages in various parts of the country. Average shortages during the first half of October increased by 33.1% to 19.3 million kWh per day compared to 14.5 million units in September, according to data from the grid regulator. While power cuts reported to the regulator had nearly halved during the first nine months of the year, they have increased in recent weeks.