New Delhi: The Centre is considering the establishment of a new, independent regulator for a coal exchange set to launch in the current fiscal year (FY25), sources familiar with the matter revealed.
This initiative holds great importance for India’s vital natural resource that has faced controversy in the past regarding inefficient coal mine allocations.
An independent regulator with specialized industry knowledge is crucial to ensure fairness and transparency in the operations of the exchange, especially after opening the market to private players for commercial mining in 2020. Private companies, alongside state-owned Coal India, are expected to be key suppliers on the exchange.
“Initially, there was consideration for the Coal Controller Organization (CCO) to regulate the exchange, but it is a government entity,” one source mentioned on condition of anonymity. “To instill complete trust and the required independence in the market, there is now a proposal for an independent regulator.”
The source added that a decision is pending, and details have yet to be finalized.
Established in 1975 through the Coal Mines (Conservation and Development) Act of 1974, the CCO is a statutory body responsible for ensuring fair production and commercial transactions of coal, including quality oversight.
Queries directed to the coal ministry remained unanswered at the time of publication.
Status of the upcoming coal exchange
Meanwhile, the ministry has been actively developing the coal exchange for some time now.
Primepress reported last October that the coal ministry has drafted a cabinet note for submission to an inter-ministerial committee before final approval by the cabinet.
However, the cabinet note is still pending finalization and submission to the cabinet committee on economic affairs (CCEA) due to ongoing discussions about the necessity of a new regulator.
Role of the exchange
The coal exchange will serve as a platform where buyers and sellers come together, providing buyers with choices regarding coal grade and location.
A significant portion of surplus coal from Coal India Ltd and its subsidiaries is expected to be traded on the exchange, amounting to approximately 200 million tonnes annually, once long-term commitments are fulfilled.
Coal India’s e-auctions will continue alongside exchange trading until the exchange operation gains momentum and matures, as per the second source.
Commercial miners are anticipated to be major sellers on the exchange.
Need for an exchange
The introduction of a coal exchange comes amidst a period of unprecedented growth in India’s domestic coal production, coupled with declining demand.
During the previous fiscal year, India’s coal production reached a record high of 997.4 million tonnes, marking an 11.67% increase from FY23. The Centre has set a production target of 1.08 billion tonnes for the current fiscal year (FY25).
In FY24, Coal India alone produced 773.6 million tonnes of coal, a 10% increase from FY23.
Moreover, captive and commercial coal blocks produced 147 million tonnes of coal in FY24, registering a 27% year-on-year growth compared to FY23.
In addition to improving accessibility for industrial consumers and facilitating fair price discovery, the exchange aims to expand the market for this highly polluting fuel. This fuel’s demand is expected to diminish significantly in the coming decades due to global energy transition efforts towards net-zero carbon emissions. India, too, aims to achieve net zero emissions by 2070 and plans to install 500 GW of renewable energy capacity by 2030, displacing a significant portion of coal demand.
What about the CCO?
Last year, the government approved the restructuring of the CCO to regulate the commercial mining sector and bolster domestic coal production to achieve an annual output of 1 billion tonnes while reducing import dependence.
A statement from the finance ministry in January indicated that the recruitment rules for the CCO’s new staff strength of 130 people are being processed, and these positions will soon be filled.
Despite ongoing restructuring of the CCO, the coal ministry now suggests that the planned exchange should operate under the supervision of a new regulator with adequate industry expertise.
