India’s Coal Distribution System

Why in News?

India’s coal distribution system has undergone significant changes over the past decade, moving from a predominantly nomination-based allocation system towards a more transparent and competitive framework involving long-term supply agreements, auctions, digital platforms and greater flexibility for consumers. Coal India Limited (CIL) now supplies coal to different categories of consumers through multiple channels to meet both long-term and short-term requirements.

About Coal Distribution in India

For the power sector, Fuel Supply Agreements (FSAs) remain the primary mechanism for ensuring long-term coal availability. The SHAKTI policy, introduced in 2017 and revised in 2025, provides a more transparent and competitive framework for allocating coal to power producers. Cumulative power-sector linkages are around 643 million tonnes (MT).

For non-power consumers, linkage auctions introduced in 2016 allow industries such as cement, steel, sponge iron and captive power producers to secure long-term coal supplies through competitive bidding. Non-power-sector linkages currently stand at around 119 MT.

For meeting short-term requirements, CIL conducts e-auctions, through which consumers, traders and exporters can procure coal through a common digital platform.

Recent Reforms by CIL

Under revised power-sector FSAs, coal supply contracts are increasingly based on the delivery of a specified quantity of Gross Calorific Value (GCV) rather than solely on the physical tonnage of coal supplied. CIL has also reduced the interest rate on delayed payments from around 14.65% to 8.25%, reducing the financial burden on power producers.

Coal Evacuation and Transportation

Efficient coal distribution also depends on transportation and evacuation infrastructure. Rail-based coal dispatch increased from 272.9 MT in 2015–16 to 414 MT in 2025–26, an increase of about 52%. Average rake loading rose from around 212.8 rakes per day to 338 rakes per day, an increase of nearly 59%.

During the same period, road-based dispatch to consumers located near mines increased from 156.1 MT to 221.8 MT, while coal movement through Merry-Go-Round (MGR) systems increased from 92.3 MT to 97.1 MT.

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