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India to set up first ‘coal trading exchange’

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India to set up Coal ExchangeAs India is the world’s second-largest producer of coal, it has decided to set up its first coal trading platform -a sort of ‘Coal exchange’, where a large number of sellers and buyers can get together to trade coal as a commodity.
It is to be noted that the coal ministry is likely to initiate auctions of about 50 coal blocks for commercial coal mining on June 11, 2020.

Coal Exchange

  • It will be an online platform where there will be transparency in terms of price & it can be determined according to demand and supply.
  • The coal exchange will actually be on the lines of commodity exchange, power bourses or the proposed gas exchange.
  • This exchange policy will help our country to move forward in commercial coal mining process with more coal dealers in the market other than Coal India and also coal blocks have been allocated to the state-level PSUs(Public Sector Undertakings) for coal sales.

Coal India Ltd to remain a dominant player:

  • After this exchange is formed, the round of new Fuel Supply Agreements (FSA) will end as at present, Coal India Limited (CIL) supplies coal through this agreement to the states.
  • CIL will continue to be the largest company to supply coal even after actually becoming the exchanges. By the year 2024, it aims to produce 1 billion tonnes of coal. If Coal India produces more coal than its production target, it will be able to sell it at the market price.

Purpose of Coal Exchange:-

As per the May month report India’s coal importing was fallen by 20% to 18.93 million tonnes and by 2023-24 ,central plan to bring India’s ‘avoidable coal imports’ to become zero.

Background:
The Union Finance Minister Nirmala Sitharaman,while announcing reforms in the coal sector stated that the government’s monopoly in the coal sector would be completely lifted and liberalised entries will be allowed to enable more participation by people with the aim to increase coal production in India and reduce the dependence of imported coal.
India, which has the third largest coal reserves in the world, is still importing coal.

About Coal India Limited (CIL):
Headquarters– Kolkata, West Bengal
Chairman-cum-Managing-Director (MD)- Pramod Agarwal