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New Delhi: According to research by Nuvama Research, the country’s coal production is predicted to continue to fall in June since demand was low in a number of areas during the pre-monsoon season. According to the research, Coal India Ltd. (CIL), the country’s largest coal producer, had a poor start to FY26, with sales volumes down 4.7% year over year from April to May 2025.

“Volume growth is missing; long-term volume growth is also at risk,” it said. With sales volume dropping around 4.7% YoY from April to May of this year, COAL got off to a slow start to FY26. We anticipate a drop in volume even on June 25.

According to data from the Ministry of Coal, the demand for coal decreased in several locations as the total electricity consumption decreased 1.6% year over year between April and May 2025.

Additionally, Coal India’s market position has been further eroded by growing volumes from commercial and captive coal mines.

Coal volume from captive and other producers increased 14.5% year over year to around 35 million tonnes (mt) in April–May 2025, accounting for 20% of total demand, up from 17.5% during the same period the previous year.

During FY25, 197 mt of coal were used by captive and other mines, representing a robust 31% YoY rise.

According to the research, the maximum rated capacity of captive mines that have been allocated or put up for auction so far is 575 mtpa, which raises worries about Coal India’s long-term volume growth.

The study has thus reduced its forecasts of Coal India’s sales volume by 2% for FY26E and FY27E, to 770 mt and 793 mt, respectively. Over FY25–27E, this corresponds to a mere 2% volume CAGR.

High inventory levels are another issue that Coal India is dealing with in terms of production capacity. Compared to the 82 mt inventory at the end of May 2024, the company’s coal stock by the end of May 2025 was around 112 mt.

Between FY20 and FY25, the average inventory was 83 mt. Any significant growth in output is anticipated to be constrained by such large stock levels.

Regarding costs, a number of variables are expected to cause Coal India’s cost of production (CoP) to increase. One major expense driver, the stripping ratio, is predicted to increase from 2.58x in FY25 to 2.67x in FY26. Due to the lack of comparable volume increases to offer operational leverage, manufacturing costs would increase.

Additionally, the next salary adjustment for non-executive personnel, which is slated for June 2026, may result in greater employee expenditures, which might cause another cost surge in FY27.

According to the paper, the total cost of production for coal in India is expected to rise at a compound annual growth rate (CAGR) of 4% between FY25 and FY27E, reaching Rs 1,422 per tonne by FY27.