Coal exchange on anvil, work underway to raise output to meet demand

To promote coal and lignite gasification projects, the government launched a Coal Gasification Incentive Scheme with a budget of Rs 8,500 crore.

The coal sector is likely to witness a spate of activities in the upcoming year, ranging from launching the maiden coal exchange to facilitating trading and rate determination of dry fuel to meet the booming demand of the economy.

The government also intends to work more closely in the area of coal gasification, as it is on a high-priority list for energy transition. Coal gasification is a cleaner option compared to burning coal, as it facilitates the utilization of the chemical properties of dry fuel. Talking to PTI, Coal Additional Secretary Rupinder Brar said, "The demand (for coal) is extremely important. And we do see demand growing in India considering the growing size of the economy… Therefore, coal will also definitely be required and we are conscious of that and are working towards that." The efforts will be to continuously augment coal output and align it with the demand, she said.

Brar mentioned that the pre-2014 policy on mine allocation has been disbanded, and now the government gives blocks to allottees only when it is sure that it will be mined. "If you do early production, operationalization of the mine, you get incentives, rebates. If you don’t, then there are penalties attached to it," the official said.

Elaborating on the priority areas of her ministry in the new year, Brar said the government is committed to a sustainable coal sector, balancing environmental sustainability with the well-being of coal-dependent communities. She expressed optimism about the coal exchange in 2025, and the details are being worked out. The production rate, both in state-owned Coal India Ltd (CIL) and its subsidiaries, as well as the commercial and captive mines, has been exhibiting excellent growth. She added that the coal ministry hopes to build on this positive growth story and take it further in the upcoming year.

According to the government’s provisional figures, the cumulative coal production, which includes output from CIL and captive and commercial mines, in the April-November period of the current fiscal year registered a growth of 6.21 percent, reaching 628.03 million tonnes (MT) over 591.32 MT during the same period in 2023-24.

According to Deloitte India, the production of thermal coal in the country is expected to grow at a moderate 8-10 percent, mainly due to a rise in electricity consumption from retail as well as commercial sources. This growth is expected to be driven by captive mines, which are expected to boost production to 175 million tonnes. "India’s thermal coal imports are expected to remain stable around 200-210 million tonnes in 2025," said Deloitte India Partner Rajib Maitra.

India is likely to continue to drive global demand for coking coal as it expands its blast furnace capacity and aims to reach 300 MT production by 2031. Imports of metallurgical coal to India are expected to increase in 2025 due to strong growth in the production of crude steel. "In FY24, Indian steel production was around 144 million tonnes. In FY25, steel production is expected to have a YoY growth of 6 percent, reaching 152-155 million tonnes. Therefore, the coking coal demand is also expected to grow by 6-7 percent," he said.

On the domestic supply side, the coal ministry had auctioned 10 coking coal blocks with a capacity of 22.5 million tonnes in 2023. Some of these blocks are expected to start production in 2025. Overall, the coking coal production in India is expected to increase from 67 MT in FY24 to 71-73 MT in FY25.

To promote coal and lignite gasification projects, the government launched a Coal Gasification Incentive Scheme with a budget of Rs 8,500 crore. Synthesis gas produced from coal gasification can be used in producing synthetic natural gas (SNG), energy fuels (methanol and ethanol), ammonia for fertilizers, and petrochemicals.

According to the coal ministry’s action plan for 2024-25, the establishment of a coal trading exchange in the country would open up the market through an online trading platform, along with a clearing and settlement mechanism, and provide easy availability of dry fuel. The draft note for the Cabinet for setting up the coal exchange has already been circulated for inter-ministerial consultations.