India is no longer a poor country. With a record-setting services industry and a very large production industry, India can afford to have its cake and eat it just like a rich country.

Yet in 2026, I read reports of rolling blackouts across the whole country, especially difficulty to deal with as temps both day and night can remain above 40 degrees Celsius (104 Fahrenheit).

Most reports (like this one) brush past causes. At best they try to blame the blackouts on surging demand. But rising demand can be predicted, and creates an incentive to increase supply. So we should expect that power companies, if they wanted to make money, could have easily built out their production sector to meet the growing demand.

That is exactly what has happened in America, where power demand continues to grow, but blackouts remain uncommon. And unlike America, India still uses cheap coal for the majority of its energy needs, so what gives?

Well it seems India’s power problems came from a toxic mix of rising energy costs and government incompetence. One or the other would be manageable, but the two together dealt a 1-2 punch to India’s power sector that left customers sweating in the heat of summer. Let’s dig in, shall we?

The first thing to realize is that not all coal is created equal. India still maintains the world’s second largest coal mining operations, after China. So in theory their power plants should never run out of coal, right? Except India’s coal is notorious for being made of almost 50% unburnable rocks, what the industry calls “ash content.” This high ash content means boilers that burn Indian coal need to be larger and have more scrubbers in order to deal with all that ash, making them more expensive.

For this reason, coal power plants on India’s coast have actually transitioned to using foreign coal rather than Indian coal. Australian coal in particular is very low ash, as little as 10%, and so a much smaller boiler and many fewer scrubbers can be used to produce the same amount of power. Some plants will also use a specific mix of Indian and foreign coal, to create an intermediate ash content of perhaps 25%-40%. This lets them save some space compared to using only Indian coal, while also not having to import quite so much expensive foreign coal.

But the Iran war threw all of this for a loop. When the war shut down oil and natural gas flow through the Strait of Hormuz, many poorer nations in Southeast Asia switched on their coal power plants to replace their unusable oil and natural gas power plants. It was that or have no power at all, since there was such a shortage of oil and natural gas. This drove the price of coal skyward.

Now, India itself still produces plenty of coal, no problem there. But the cost of high quality *imported* coal was a problem. All these power plants that relied on buying foreign coal suddenly found themselves with skyrocketing import costs. That would usually be no problem, they would raise prices on consumers to compensate. No one likes expensive power, but expensive power is way the hell better than *no power at all*. But this is where the governments of India’s many states stepped in.

No politician wants to lose election, and so no government wants to be responsible for rising prices. But the money must still be paid for that imported coal, so did the government step in to subsidize the power stations? Did they bollocks. No politician wants to be responsible for skyrocketing public debt either, *nor* increasing public taxes. The governments forbade the power plants from raising prices, but also didn’t give them money to compensate.

So could the power companies take out loans? Again no, India’s state-owned power companies have been oceans of bad debt for years as local governments didn’t want to fund them and so have demanded local banks give them roll-over loans for years. Modi finally stepped in and forbade new loans going to any power company that isn’t somewhat solvent. And that rules out any power plant that is selling power for less than the price of imported coal (as demanded by the politicians).

India’s solar buildout has only worsened this problem, as there are no batteries to store the solar power. See, solar power plants are only responsible for providing power during the day, and when it’s sunny. But they get the gain of still being able to demand full price in competition with the *coal* power plants, which are responsible for power both day and night, sunny or cloudy. Solar plants have all the profit, but none of the responsibility that baseload coal plants have.

This means that when solar power cuts off during the evening, or during a cloudy spell, the coal plants must quickly ramp their power supply up to compensate. An expensive process which would be mitigated if those plants just provided all the power during both day and night. India would normally use natural gas “peakers” for ramping power, but remember that natural gas was expensive and the state governments wouldn’t raise prices to compensate.

So what is a power plant to do, when it cannot afford to import more coal because the state governments won’t let it raise prices to compensate AND it cannot take out loans to bridge the gap? It goes down for “maintenance” or declares “load-shedding.” The former is often used an excuse for “we literally cannot supply power at this time,” and the latter is just a euphemism for a blackout.

Loadshedding increased in India severely during 2026, but is falling back down as energy prices now return to normal.

If governments allowed coal companies to raise prices to compensate, this crisis would not have happened. If solar plants were required to compensate coal plants for taking on all the nighttime/cloud-time sectoral risk, this would not have happened. And of course, if the energy crisis had not happened, this would not have happened.

But it did happen, and the Indian state governments cannot control the world, they can only control themselves and their laws. And their obstinance in the face of high prices meant their states suffered greatly due to a complete *lack* of power, when they could instead have had *expensive* power. Economists agree that the GDP hit is vastly greater in the former case than the latter, and I’m sure anyone sweltering or *dying* in a non-air conditioned room would think so too. A shame the politicians couldn’t see it.