Coal exchange likely to start later this year, move aimed at setting up a mature coal trading market

New Delhi: The government proposes to start a coal exchange later this year to trade coal mined from private commercial mines along with Coal India's spot auctions. A senior government official said the move is aimed at setting up a mature coal trading market by the time the commercial coal mines become operational.
“In about 5-7 years, 40% of the coal is expected to be produced by companies other than Coal India (CIL). It is our duty to offer a transparent platform for discovery of prices and selection of buyers. Later, power sector can also migrate to it,” the official said on condition of anonymity.

The coal ministry has issued tenders seeking consultancy service in setting up the coal exchange. ET was the first to report on June 8, 2020, that India has decided to set up a coal trading platform as a giant leap towards completely throwing open the sector to market forces. The official said the gas trading exchange was set up only last year while the first major commercial gas supply from non-government sources started in 2009.

“KG basin gas started in April 2009 and they set up a gas trading platform only last year. The coal ministry has come out with commercial mining in 2020, and in later in 2021 proposes to have a coal trading platform,” he said. He said exchange trade takes 3-4 years to mature. “By the time commercially mined coal comes, India will have a vibrant coal market.”

The government proposes to trade some of Coal India spot auctions on the exchange for volumes, he said. “Coal India sells 20%-25% of its coal through auction mechanism that can migrate to the trading platform and help it achieve some volume. Presently, imported coal is settled on markers from Indonesia and Australia. “Even imported coal could be priced in these exchanges,” he said. The coal ministry will take assistance from the selected consultants to work on the broad contours of the coal market.

“The appointed consultants would study, hold discussions and help the government in finding answers to questions like who should trade on the exchange, should it be similar to gas trading, should there be somebody supervising these platforms, can we use existing commodity exchanges and who should be controlling the exchange. These are new initiatives where nobody has an experience,” the official said.

The coal ministry on Monday allotted mines to 19 successful bidders under the country's first commercial coal mining auction. Coal minister Pralhad Joshi said the second tranche of coal auctions are expected to begin this month. The government launched a single-window clearance portal to help the coal block developers expedite coal production.