India: Eliminating Limitations On Power Plant Coal Purchases

India: Eliminating Limitations On Power Plant Coal Purchases: In the past, the New Coal Distribution Policy, 2007 (NCDP) controlled the supply of coal to thermal power plants. The Shakti Policy of 2017 has replaced the place of the NCDP’s coal linkages requirements for the power sector.

The commercial terms and conditions of the Fuel Supply Agreement (FSA) signed by the coal companies and the power plants govern the supply of coal under these policies. In 2022, the government decided that coal companies should provide coal to meet the full Power Purchase Agreement (PPA) requirements of all current Power Sector linkage holders, regardless of the trigger and Annual Contracted Quantity (ACQ) levels.

The FSA’s coal supply beyond the ACQ has made it possible to supply coal in accordance with power plants’ needs. Additionally, coal businesses sell coal through Single Window e-auctions, which serve all industries, including the electricity sector.

When coal is supplied under the FSA, prices are set in accordance with the FSA’s criteria, commercial terms, and periodic price announcements from Coal India Limited and Singareni Collieries Company Limited.

The focus of the Government is on increasing the domestic production of coal to ensure sufficient availability of domestic coal. The country has witnessed highest ever coal production in the year 2023-24. The all-India coal production during the year 2023-24 was 997.826 Million Tonne (MT). In the current year 2024-25, the country has produced 929.15 MT (provisional) of coal (upto February, 2025) in comparison to 881.16 MT in the corresponding period of the last year 2023-24 with a growth rate of 5.45%.

Steps Taken By The Government To Ensure Adequate Coal Availability

Regular reviews by Ministry of Coal to expedite the development of coal blocks.

Enactment of Mines and Minerals (Development and Regulation) Amendment Act, 2021 [MMDR Act] for enabling captive mines owners (other than atomic minerals) to sell up to 50% of their annual mineral (including coal) production in the open market after meeting the requirement of the end use plant linked with the mine in such manner as may be prescribed by the Central Government on payment of such additional amount.

Single Window Clearance portal for the coal sector to speed up the operationalization of coal mines.

Project Monitoring Unit for hand-holding of coal block allottees for obtaining various approvals / clearances for early operationalization of coal mines.

Auction of commercial mining on revenue sharing basis launched in 2020. Under commercial mining scheme, rebate of 50 % on final offer has been allowed for the quantity of coal produced earlier than scheduled date of production. Further, incentives on coal gasification or liquefaction (rebate of 50 % on final offer) have been granted.

Eliminating Limitations On Power Plant Coal Purchases

Terms and conditions of commercial coal mining are very liberal with no restriction on utilization of coal, allowing new companies to participate in the bidding process, reduced upfront amount, adjustment of upfront amount against monthly payment, liberal efficiency parameters to encourage flexibility to operationalize the coal mines, transparent bidding process, 100% Foreign Direct Investment (FDI) through automatic route and revenue sharing model based on the National Coal Index.

Coal India Limited (CIL) has adopted a number of measures to increase coal production. In its Underground (UG) mines, CIL is adopting Mass Production Technologies (MPT), mainly with Continuous Miners (CMs), wherever feasible. CIL has also planned Highwalls (HW) mines in view of the availability of Abandoned/ Discontinued mines. CIL is also planning large capacity UG mines wherever feasible. In its Opencast (OC) mines, CIL already has State-of-the- Art technology in its high-capacity Excavators, Dumpers and Surface Miners.

Union Minister of Coal and Mines Shri G. Kishan Reddy provided this information in a written response to the Rajya Sabha today.

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