New Delhi: The Centre is mulling the creation of a new, independent regulator for a coal exchange that is being planned for launch in the ongoing fiscal (FY25), two people aware of the development said.
The development assumes significance for one of India’s most important natural resources, which was embroiled in controversy in the not-too-distant past regarding inefficient allocation of coal mines.
An independent regulator with sectoral expertise would be key to providing fairness and transparency to the operations of the exchange, especially after the market was opened up in 2020 for private players to take up commercial mining. Commercial players are expected to be key suppliers on the exchange along with state-run miner Coal India.
“Initially there was the thought that Coal Controller Organisation (CCO) would regulate the bourse, but it is a government body,” one of the two people mentioned above said on condition of anonymity. “In order to provide the market complete trust and the required independence, there is a consideration for an independent regulator.”
The person added that a decision is yet to be taken and modalities have not been worked out.
Set up in 1975 through the Coal Mines (Conservation and Development) Act of 1974, the CCO is a statutory body that ensures fair production and commercial transactions of coal, including quality surveillance.
Queries sent to the coal ministry remained unanswered till press time.
Status of the upcoming coal exchange
Meanwhile, the ministry has been working on the coal exchange for sometime now.
Mint reported last October that the coal ministry has prepared a draft cabinet note that would be sent to the inter-ministerial committee before it is finally put to the cabinet for approval.
However, the cabinet note has not yet been finalized and sent to the cabinet committee on economic affairs (CCEA) given the deliberations over the requirement of a new regulator.
Role of the exchange
The coal exchange will be a platform for buyers and sellers of the mineral wherein buyers will have options in terms of grade of coal and location.
A large portion of the surplus coal of 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.
The e-auctions of Coal India would also continue, along with trading on the exchanges, till the trading on the exchange gains momentum and turns mature, said the second person mentioned above.
Commercial miners are expected to be key sellers on the exchange.
Need for an exchange
The plan for a coal exchange comes on the backdrop of unprecedented growth in India’s domestic coal production and slackening demand.
In the previous fiscal, India’s coal production touched a new high of 997.4 million tonnes, marking an 11.67% increase from FY23. For this year (FY25), the Centre has set a target of 1.08 billion tonnes.
Coal India alone produced 773.6 million tonnes of coal in FY24, 10% higher than FY23.
Further, captive and commercial coal blocks produced 147 million tonnes coal in the last fiscal (FY24), registering a year-on-year growth of 27% compared to FY23.
Along with making the fossil fuel accessible for all industrial consumers and helping in fairer price discovery, the exchange is also aimed at widening the market for this highly polluting fuel, the demand for which is expected to largely cease within a decade or two, with all countries vying for energy transition and net-zero carbon emissions.
India, too, aims to achieve net zero by 2070, and with a target to install 500 GW of renewable energy capacity by 2030, thereby displacing a large portion of the demand for coal.
What about the CCO?
To be sure, last year, the government approved the restructuring of the CCO with the aim to regulate the commercial mining space and augment annual domestic coal production to achieve 1 billion tonnes output per year and reduce import dependence.
This January, a finance ministry statement said that the approval process for recruitment rules of the CCO’s freshly sanctioned manpower strength of 130 people and filling up of these posts are under process.
Even as the CCO’s restructuring is ongoing, the coal ministry is now of the view that the planned exchange should be placed under the…
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