The government has proposed that the national coal exchange adopt a double-sided closed auction bidding mechanism for price discovery, with the objective of maximising overall economic surplus, according to the revised draft Coal Exchange Rules, 2025.

The proposal forms part of updated draft norms issued by the Ministry of Coal, following the first draft released in September. Stakeholders have been invited to submit comments on the revised rules by January 13, 2026. Under the proposed framework, both buyers and sellers will submit their bids confidentially to the exchange, after which a specialised matching engine will aggregate bids to determine a single Market Clearing Price and Market Clearing Volume.

The ministry said the price discovery process will be guided by the principle of maximisation of economic surplus, defined as the combined surplus of buyers and sellers, while taking into account all bid types. The bidding and price discovery mechanism will be implemented in line with procedures approved by the regulator from time to time, based on proposals submitted by the coal exchange.

The coal exchange is envisaged as a regulated online mineral marketplace where buyers and sellers can transact, trade and enter into contracts for coal. It will be overseen by the Coal Controller Organisation, which will act as the regulator responsible for registering coal exchanges and conducting market oversight and surveillance.

Under the draft rules, the regulator will frame detailed regulations to monitor exchange activities and ensure market integrity, including the prevention of cartelisation, insider trading, circular trading and market manipulation. The oversight framework will also focus on detecting abuse of dominant positions and ensuring transparency and fairness in price discovery to build confidence among market participants.

Market oversight will include procedures for registration of participants, mechanisms for data collection, requirements for information disclosure, and safeguards to prevent misuse or unauthorised access to sensitive data. The regulator will also conduct analytics and continuous market surveillance based on data submitted by participants.

The ministry said the creation of a coal exchange is intended to develop an alternative market structure that reduces dependence on state-controlled mining public sector undertakings. The exchange is expected to support a more open, transparent and real-time coal trading ecosystem, particularly benefiting consuming industries such as MSMEs through on-demand access to domestic coal.

By enabling a shift from the existing ‘one-to-many’ coal sales model to a ‘many-to-many’ framework, the exchange is expected to play a key role in modernising India’s coal market. The ministry noted that increasing domestic coal availability could lead to a surplus scenario, necessitating major reforms in coal sales channels supported by a strong regulatory mechanism. In this context, the establishment of coal exchanges is seen as a critical step towards promoting competitive markets for coal in India.