India planning to launch its first coal exchange
15 June 2020
India has decided to set up a coal trading platform, taking a giant leap towards completely throwing open the sector to market forces as the country gears up for commercial coal mining auctions, which will increase the number of sellers of coal.
As per the proposal, entire coal produced in the country will be traded on a ‘Coal Exchange,’ an online platform where pricing is determined transparently through demand and supply. The exchange is being thought out on the lines of commodity exchanges, power bourses, or the proposed gas exchange.
This could mean the end of the new Fuel Supply Agreements (FSA) regime of Coal India where the state-run miner signs contracts for coal supply with consumers. Coal India Ltd is expected to remain a dominant player in the sector given its production target of one billion tonnes by 2024 and will sell incremental capacity at market prices, a senior government official said.
Coal consumers and traders welcomed the move but said the exchange should be started only when there are multiple buyers and sellers. The coal ministry is likely to begin auctions of about 50 coal blocks for commercial coal mining.
The government official said that discussions have begun in the ministry and a coal exchange is certain to be set up after the government addresses all related concerns.
The official said that the proposed coal exchange may be the only trading platform for the organised sale of coal. “Nuances like shape and size of the platform, powers, regulations, issue of present FSAs, will all be discussed in due course of time,” he said.