New Delhi: With stakeholders consultation over, the Ministry of Coal has submitted its proposal to the Cabinet for setting up coal trading exchanges in the country through an amendment in the Mines and Minerals (Development & Regulation) Act in the upcoming Winter session of Parliament.
Ministry officials said that post parliament approval, the rules for trading would be framed within six months in consultation with Ministry of Law & Justice and the existing office of the Kolkata-based Coal Controller Organization (CCO) would be designated as its regulator.
Using the guiding legislation and rules, the CCO would establish the enabling frameworks and issue regulations for establishment of the exchanges and its exchange operators — after getting license from the CCO — would establish the market framework for the operationalization of the exchanges.
The CCO is an Indian government office under the Ministry of Coal that was established in 1916 to control coal production and distribution during the First World War. Today, its roles include regulating coal quality, monitoring mine closure activities, maintaining coal production data for all mines, and acting as an appellate authority for quality disputes.
Recent policy reforms in the coal sector have contributed to increased availability in the county with a large volume coming from the mines allocated for commercial mining or for captive purpose. It is expected that the coal production from commercial/captive mines would touch 320 million tonnes by 2030 with total output, including from state-run companies, poised to grow beyond 1,500 million tonnes.
In view of the increasing share of coal production by commercial/captive miners, the ministry plans coal trading exchanges for all coal producers wherein the shift would be from the current several ‘one-to-many’ e-auction platforms and sales channels to a single ‘many-to-many’ platform where both buyers and sellers can bid thereby making price discovery of coal more efficient and competitive.
The ‘bid-ask’ format with buyers and sellers continuously sharing their price points on the platform depending upon the product and price discovery mechanism would lead to a paradigm shift towards an efficient price discovery and enable market participants to manage their risks better.
Assuming certain quantum of e-auction by Coal India Limited, 50 percent from commercial coal blocks and 20 percent from captive blocks, the volumes traded on the exchanges is expected to be in the range of 100-130 million tonnes in the next three years, said officials.