Finance minister Nirmala Sitharaman proposed in the federal budget to double the tax collected at source rate on the sale of coal and lignite from one per cent to two per cent, describing the change as part of a broader effort to rationalise TCS rates and address cash flow issues. The measure was presented as an attempt to reduce multiplicity of TCS rates and to rationalise rates affecting taxpayer cash flow. The proposal was also stated to apply to the sale of iron ore.

Industry analysts said the move reflected shifting priorities in the minerals sector even as coal and iron ore remained central to industrial activity, with coal output projected to reach 1.1 billion (bn) tonne (t) in FY26. Coal India was reported to account for over 80 per cent of domestic coal production, and the state miner had designated 2026 as a year of reform with a focus on higher output, improved quality, technology and diversification. Those developments were cited as background to policy changes in energy and mining.

India's electricity demand continued to grow at a robust pace, and coal based power generation accounted for around 70 per cent of total electricity output. Rising industrial activity and peak power requirements had kept coal supply and evacuation central to energy security. Analysts suggested that adjustments to TCS rates were intended to balance revenue administration with operational realities in the supply chain.

The government framed the change as a technical and fiscal measure to streamline tax collection across commodities and to reduce compliance complexity for authorities. Market participants were expected to assess immediate cash flow implications for producers and utilities while awaiting final rules and thresholds that would determine practical impact. Officials indicated that rationalisation of rates formed part of a longer term agenda on tax administration.

Stakeholders were likely to monitor implementation details announced in the budget documents and subsequent clarifications from tax authorities. The effect on domestic supply chains and fiscal receipts was expected to emerge as administrators and businesses adjusted to the revised rate.