Despite strong pledges to harness renewable energy sources like solar and wind, coal is still used to produce nearly three-fourths of India's power.
Coal India's consolidated net profit rose about 17%, to 90.69 billion rupees ($1.1 billion) for the quarter ended Dec. 31, surpassing analysts' average estimate of 77.94 billion rupees, according to LSEG data.
The Kolkata-based company, which accounts for 80% of the country's annual coal output, ramped up mining of the fossil fuel this quarter, with production jumping 10.5% year-on-year.
Coal inventories hit rock-bottom in October - dipping lower than in the months of April and July, when temperatures were extremely high - to meet soaring power demand as contributions from wind and hydroelectric sources declined after an unusually dry summer.
Inventory levels were sufficient to last seven days in October, from which they later recovered to 12 days in December, brokerage Elara Capital had said in a note.
A recovery in dwindling coal stockpiles led to a decline in the e-auction premiums the miner earned in the quarter, leading to a marginal 2.8% rise in revenue during the period.
Coal India earns a premium from e-auctions, or spot auctions, held over and above its supply obligations when demand outstrips supply.
Meanwhile, the miner's expenses stayed largely flat.
The company's board also declared a second interim dividend of 5.25 rupees per share.
Shares of Coal India closed 5.13% lower ahead of results.
($1 = 82.9920 Indian rupees)
(Reporting by Hritam Mukherjee in Bengaluru; Editing by Pooja Desai)