The Ministry of Coal has released an overview of how India’s coal distribution system has transformed over the past ten years, moving away from traditional government allocation towards a mix of long-term supply agreements, competitive auctions and digital trading platforms. Coal India Limited (CIL), the state-owned producer that dominates domestic coal supply, now serves different customer groups through multiple channels tailored to their needs and purchase volumes.
The shift reflects efforts to make coal procurement more transparent, efficient and responsive to market demand across power plants, steel mills, cement factories and other industries that depend on coal.
Key facts
- Power sector long-term linkages total around 643 million tonnes (MT)
- Non-power sector linkages total around 119 MT
- Rail despatch rose from 272.9 MT in FY 2015-16 to 414.0 MT in FY 2025-26, a 52 per cent increase
- Daily rake loading grew from 212.8 rakes per day to 338 rakes per day, a 59 per cent rise
- Road mode despatch increased from 156.1 MT to 221.8 MT
- CIL has 72 First Mile Connectivity projects with planned capacity of 843 MT
- Interest rates on delayed payments reduced from 14.65 per cent to 8.25 per cent
- Around 105 MT of coal linkages rationalised since 2014, generating potential annual savings of over ₹7,500 crore for the power sector
- SHAKTI policy introduced in 2017, revised in 2025
- Linkage auctions for non-power sectors launched in 2016
Multiple supply channels for different consumers
CIL now distributes coal through several distinct pathways. Power plants secure long-term coal through Fuel Supply Agreements (FSAs), which form the backbone of predictable electricity generation. The SHAKTI scheme, which was revised in 2025, introduced greater competition and transparency to how coal gets allocated to power producers.
Industries outside the power sector, such as cement, steel, sponge iron and captive power plants, can bid for long-term coal supplies through linkage auctions that began in 2016. This competitive route allows them to secure guaranteed supplies over a period of years.
Buyers with shorter-term or smaller needs use electronic auctions, where any consumer, trader or exporter can participate on an equal footing. These e-auction platforms have created spot markets where coal can be bought and sold quickly based on immediate requirements. Very small consumers, typically those needing fewer than 10,000 tonnes per year, can access coal through State-Nominated Agencies.
Simplifying coal procurement and payment
CIL has made several changes to ease the burden on coal buyers. For the first time, power sector FSAs now guarantee a fixed amount of energy output, measured in Gross Calorific Value, rather than simply tonnage. This means consumers pay for the actual energy content they receive, not just the weight of coal delivered.
The company has also reduced interest rates charged on late payments from around 14.65 per cent to 8.25 per cent, improving cash flow for power plants and other large buyers. Since 2014, CIL has consolidated around 105 MT of coal linkages, cutting transportation costs and allowing power plants to source coal more efficiently. This rationalisation has freed up potential annual savings exceeding ₹7,500 crore for the power sector.
For non-power buyers, CIL has introduced electronic bank guarantee facilities, pre-auction coal quality testing, and the ability to register multiple plants under a single bidding identity. These changes reduce administrative friction and allow greater choice in how coal is transported.
Digital transformation of coal trading
Much of this evolution relies on digital systems. Online platforms now handle information sharing, payment reconciliation, quality sampling reports, grievances and integration with railway networks. These systems allow producers, buyers and logistics providers to conduct business without visiting offices in person, speeding up transactions and reducing errors.
Expansion of coal evacuation capacity
Moving coal from mines to consumers requires expanding transport infrastructure. Rail despatch, the primary mode, has grown 52 per cent over a decade, with daily rake movements up 59 per cent. Road transport and Merry-Go-Round systems, which use dedicated rail loops between mines and power plants, have also expanded.
CIL is now investing in First Mile Connectivity projects, mechanised loading facilities and coal storage silos to speed up the journey from pit to market. The company has undertaken 72 such First Mile Connectivity projects designed to handle 843 MT of coal annually, in addition to 20 existing silos with a combined capacity of 151 MT. By the end of FY 2028-29, these investments are expected to create mechanised loading capacity of around 994 MT per year.
What this means for you
If you work in power generation, steel, cement or other coal-dependent industries, coal procurement is now less dependent on government favour and more based on competitive bidding and transparent pricing. Small businesses can access coal through simpler channels. Power consumers benefit from lower interest rates on delayed payments and more efficient coal supplies, which can reduce electricity costs. Digital platforms mean fewer delays and easier access to information about coal quality and availability.