India to rely more on coal as LNG disruptions limit gas-fired support

India's gas-fired power plants are unlikely to provide meaningful support during the summer peak demand season as supply disruptions linked to conflicts in the Middle East have sharply curtailed LNG availability, forcing the country to rely more heavily on coal-based generation to meet electricity needs, market participants said.

Gas-based generation fell to about 1.033 TWh in March as of March 19, against a target of around 2 TWh for the month, according to data from the Central Electricity Authority. The decline followed a March 9 government order redirecting natural gas and regasified LNG to priority sectors, with curtailments primarily affecting petrochemical and power sector consumers.

"Since March 9, gas consumption has virtually stopped. The peak load demand expected this year is around 270 GW, and without gas support, more coal-based power would be required. It is not easy to say how it will be managed," a power sector end-user said.

In April 2025, India imported more than 60% of its LNG cargoes from Qatar and the United Arab Emirates. However, QatarEnergy has issued a force majeure amid the ongoing Middle East conflict.

Gas-fired capacity in India typically plays a limited but strategic role in the power system, providing flexible generation during periods of peak demand or grid imbalances rather than serving as a base-load fuel. Coal, meanwhile, generates over 70% of electricity with just under 50% installed capacity.

In recent summers, the government has periodically directed gas-based plants to operate to help meet peak load demand, though utilization has often been constrained by high LNG prices and limited domestic gas supply. In 2025, gas-based generation contributed only a small share of India's overall power output, with most peak demand managed through coal-fired plants and hydroelectric generation.

Another industrial end user said power demand itself may moderate as some sectors reduce operations amid energy shortages.

"Industries are themselves curtailing production, like ceramics, glass, and cement exporters to Gulf countries in particular. Some are under forced shutdown or have reduced output due to limited energy supply," the source said.

Platts assessed the West India Marker for May delivery at $22.557/MMBtu on March 20, more than doubling from $10.397/MMBtu on Feb. 27, before the conflict in the Middle East.

Coal takes a larger role

Tightness in LNG supply and rising gas prices have also begun to influence the thermal coal market, reinforcing coal's role as the balancing fuel for India's power system.

The Platts CFR India 4,200 kcal/kg GAR rose from $67/mt on Feb. 27 to $77.40/mt on March 20, supported by stronger buying interest in parts of Asia and firmer energy market sentiment.

Market participants said utilities in Japan, South Korea and Taiwan have been seeking additional cargoes of higher calorific value coal as gas markets tighten, while some European buyers have also evaluated coal purchases where fuel-switching economics allow.

For India, the shift toward coal is less about fuel switching and more about system design.

"Gas has largely played a supporting role in India's power mix, so using more coal in place of gas during peak demand periods is a natural adjustment," an India-based coal importer said. "The larger impact of LNG disruption will likely be felt in non-power sectors where most gas is consumed."

India's electricity demand rose about 2% year over year to 133 billion units in February, the highest February consumption since at least 2010, driven by rising temperatures, according to a March 9 note by CRISIL, majority-owned by S&P Global.

Coal inventories at power plants remain relatively comfortable for now. Stocks stood at 57.57 million metric tons as of March 18, enough for about 19 days of consumption, according to the Central Electricity Authority.

However, with peak electricity demand projected to reach around 270 GW this summer, market participants said the system will likely rely heavily on coal-fired generation to maintain supply stability if LNG availability remains constrained.

"While seaborne coal prices are seeing the impact due to the rise in gas costs, in the Indian context, there could be higher use of domestic coal, and opportunistic buying from international markets due to high prices," another Indian coal trader said.