The coal ministry has prepared a draft cabinet note for setting up a coal trading exchange with the Coal Controller Organization acting as the regulator. The government plans to launch such a platform this fiscal.
The draft will be sent to the inter-ministerial committee before it is put to the cabinet for approval, a person aware of the development said.
The exchange is expected to open up the coal market through an online trading platform and provide easy availability of the fuel.
“The draft note has been prepared and would go to the inter-ministerial committee next. It will be a platform for buyers and sellers wherein buyers will have options in terms of grade of coal and location,” the person added.
Another person said any surplus coal remaining with Coal India Ltd and its subsidiaries after long-term linkage commitments are met, is likely to be traded on the exchange, which may come to around 200 million tonnes annually.
Currently the amount of coal contracted under long-term linkages stands at around 550 million tonnes and going ahead, with production increasing and demand from thermal plants growing, it is expected to touch 700-800 million tonnes, the person added. India’s total coal production in FY23 was 893.08 million tonnes and the government has set a target of 1 billion tonnes for this fiscal year.
Private players who have taken up coal blocks under commercial and captive mines auctions opened up since 2020 are expected to emerge as key sellers on the exchange.
These commercial mines produced 115 million tonnes in FY23 and the government has set a target of 162 million tonnes for the current financial year. On the regulatory side, the first person mentioned above said: “The Coal Controller Organization is likely to be the regulator initially. Going ahead as the exchange evolves, a specific regulatory body may be set up.”
The Coal Controller Organization, under the ministry of coal collects and maintains coal production data of all private and public sector coal mines, carries out inspection of collieries to assess the grade or size of coal and acts as an appellate authority in case of a dispute between consumers and owner arising out of declaration of grade and size of coal, among other functions.
The ministry has not finalized the ownership structure for the exchange, but may hire a professional agency to operate the platform.
The person said that the platform would help in better price discovery.
Coal India currently sets the notified price for its produce along with its subsidiaries’ for long-term linkages. Further the public sector major along with producers also sells the produce through e-auctions.
In May this year, the board of Coal India Ltd approved a price increase of 8% over the existing notified prices for high-grade coal.
The price of high quality G11 grade of coal largely used in thermal power plants is currently around ₹2,000 per tonne at pitheads. By the time it reaches the thermal plants, the price including the transportation cost may go well above ₹4,000 per tonne.
The exchange gains significance at a time when the country has witnessed phases of high power demand and panic situation arising out of low availability domestic coal to meet the thermal plants’ needs due to varied reasons including logistics issues between coal production states and several consuming regions.
In its annual plan for FY24, the ministry had informed of its plans to establish a coal trading exchange and said that Crisil Ltd has been engaged as consultant for providing strategic and implementation management consulting services to assist the ministry in the process of setting up the exchange.
“A technical evaluation committee has been constituted in the ministry of coal for evaluation of the reports submitted by Crisil Ltd for scrutiny and acceptance. It is targeted to launch the coal trading exchange during the FY 2023-2024,” it said.
