Government Removes Restrictions on Coal Purchases for Power Plants
26 Mar 2025 CW Team
The supply of coal to thermal power plants was previously governed by the New Coal Distribution Policy (NCDP), 2007. However, in 2017, the Shakti Policy replaced NCDP provisions for the power sector, with coal supply regulated under Fuel Supply Agreements (FSA) between coal companies and power plants. In 2022, the government decided that coal companies would supply coal to meet the full Power Purchase Agreement (PPA) requirements of all existing linkage holders in the power sector, regardless of Annual Contracted Quantity (ACQ) levels. This move has ensured that coal supply aligns with the actual demand of power plants. Additionally, coal companies continue to sell coal under the Single Window e-auction system, catering to various sectors, including power generation.
The government remains focused on boosting domestic coal production to ensure a steady supply. India recorded its highest-ever coal production in FY 2023-24, reaching 997.826 million tonnes (MT). In FY 2024-25 (up to February 2025), coal production stood at 929.15 MT, marking a 5.45% growth compared to 881.16 MT in the same period of the previous year.
To enhance coal production and streamline availability, the government has taken several measures, including:
- Regular monitoring by the Ministry of Coal to accelerate coal block development.
- Amendments to the MMDR Act, 2021, allowing captive mine owners (excluding atomic minerals) to sell up to 50% of their annual coal output in the open market after fulfilling their plant’s requirements.
- Single window clearance portal to expedite coal mine approvals.
- Project Monitoring Units (PMUs) to assist coal block allottees in securing necessary clearances.
- Commercial coal mining auctions on a revenue-sharing basis, with incentives such as a 50% rebate for early production and additional incentives for coal gasification and liquefaction projects.
- Liberalised policies for commercial coal mining, including 100% Foreign Direct Investment (FDI), transparent bidding, and relaxed efficiency parameters to encourage participation.
Coal companies have also implemented strategies to enhance production capacity:
- Coal India Limited (CIL) has adopted Mass Production Technologies (MPT) in underground mines, including Continuous Miners (CMs) and Highwall Mining in abandoned or discontinued mines.
- CIL’s opencast mines utilise state-of-the-art technology with high-capacity excavators, dumpers, and surface miners.
- Singareni Collieries Company Limited (SCCL) is actively developing new projects while upgrading coal evacuation infrastructure, including Coal Handling Plants (CHPs), Crushers, and Pre-weigh Bins.
Union Minister of Coal and Mines, Shri G. Kishan Reddy, provided this update in a written reply to the Rajya Sabha, reiterating the government’s commitment to securing a stable coal supply for India's growing energy needs.
(PIB)