Coal Distribution Over the Years: From Allocation to Auction, Powering India’s Growth
Over the past decade, Coal India Limited (CIL) has transformed India's coal distribution system from traditional nominations to a competitive framework featuring long-term supply assurance, e-auctions, and digital interfaces. The distribution network now includes Fuel Supply Agreements (FSAs) for the power sector under policies like SHAKTI, linkage auctions for non-power industries, and options for MSMEs via State-Nominated Agencies. Additionally, enhanced logistics—such as increased rail despatches and First Mile Connectivity (FMC) projects—have improved the overall speed, transparency, and efficiency of coal procurement and delivery.
Why It Matters
This press release outlines significant structural reforms, policy milestones like the SHAKTI policy, and logistical advancements in India's coal sector overseen by the Ministry of Coal, making it useful for economic and governance questions in competitive exams.
In Simple Words
Over the last ten years, Coal India Limited has shifted India's coal distribution from old allocation methods to modern competitive auctions, digital platforms, and long-term supply agreements. This evolution ensures that power plants, industries, and smaller businesses receive coal efficiently and transparently.
To improve procurement and delivery, CIL introduced fixed Gross Calorific Value agreements, lowered late payment interest, and upgraded logistics like rail despatches and First Mile Connectivity (FMC) projects. These changes reduce transportation costs, ease financial burdens, and support India's growing energy needs.
Key Points
- Coal India Limited (CIL) has shifted its system from traditional linkages to long-term supply assurance, competitive auctions, and digital interfaces.
- Fuel Supply Agreements (FSAs) serve as the foundation for the power sector, supported by the SHAKTI policy introduced in 2017 and revised in 2025.
- Linkage auctions for non-power consumers were introduced in 2016 for industries like cement, steel, sponge iron, and captive power.
- Cumulative power-sector linkages stand at around 643 MT, while non-power linkages are around 119 MT.
- Smaller MSME consumers requiring less than 10,000 tonnes annually are served through State-Nominated Agencies (SNAs).
- CIL reduced interest rates on delayed payments from around 14.65% to about 8.25% for power FSAs.
- Rail mode despatch increased from 272.9 MT in FY 2015–16 to 414.0 MT in FY 2025–26, marking a 52% growth.
- CIL has undertaken 72 First Mile Connectivity (FMC) projects with a planned capacity of 843 MT.
Exam Angle
A. 2017
Source: Press Information Bureau