On March 24, 2025, the Ministry of Coal announced significant changes to coal supply regulations for thermal power plants, bringing an end to previous restrictions under the New Coal Distribution Policy (NCDP) of 2007. This move aligns with the government’s ongoing commitment to ensuring energy security and fostering an efficient power generation sector.
Key Highlights:
Shifting from NCDP to Shakti Policy: The previous NCDP provisions for coal linkages in the power sector have been replaced by the Shakti Policy, introduced in 2017. This policy shifts the approach to coal distribution, allowing coal companies and power plants to operate under commercial terms outlined in the Fuel Supply Agreement (FSA).
Coal Availability for Power Plants: In 2022, the government took a decisive step, ensuring that coal companies would supply enough coal to meet the full Power Purchase Agreement (PPA) requirements for existing power sector linkage holders, regardless of trigger levels or Annual Contracted Quantity (ACQ). This change has already led to an increase in coal supply for thermal power plants beyond the ACQ, helping them meet growing demands.
Coal Auctions and Pricing: Apart from supply under FSAs, coal is also made available through Single Window e-auctions, catering to all sectors, including power plants. The coal price in these cases is based on the terms of the FSA and notifications issued by Coal India Limited (CIL) and Singareni Collieries Company Limited (SCCL).
Focus on Increasing Domestic Coal Production: A key pillar of the government’s strategy is boosting domestic coal production. India saw record coal production in the 2023-24 period, with 997.8 million tonnes (MT) produced. In the current year (2024-25), provisional production figures indicate a growth rate of 5.45%, with 929.15 MT of coal produced up until February 2025.
Steps Taken to Enhance Coal Production: The Ministry of Coal has implemented several measures to enhance coal output:
- Regular Reviews and Expeditions: The government regularly reviews coal block developments to speed up production.
- Mines and Minerals Act of 2021: This act allows captive mine owners to sell up to 50% of their production in the open market after fulfilling their plant’s needs.
- Single Window Clearance Portal: The portal expedites approvals for operationalizing coal mines.
- Revenue Sharing Auction Model: Launched in 2020, this scheme promotes commercial mining with incentives for early production.
- Liberalized Terms for Commercial Mining: The government has introduced flexible terms for commercial coal mining, encouraging greater participation in coal auctions and offering various incentives like reduced upfront payments and coal gasification/liquefaction benefits.
Coal India and Singareni Collieries Leading the Charge: Both Coal India Limited (CIL) and Singareni Collieries Company Limited (SCCL) are making concerted efforts to ramp up coal production. CIL is embracing cutting-edge technologies in both underground and opencast mining to boost efficiency. Similarly, SCCL is working to improve infrastructure, including coal handling plants and crushers, to streamline coal evacuation and distribution.
Conclusion: The government’s recent decision to remove coal purchase restrictions is a significant milestone for India’s energy sector. By facilitating unrestricted access to coal and focusing on boosting domestic production, the government is not only securing the future of power generation but also strengthening the country’s energy independence. With these reforms, the power plants can now operate with greater flexibility and security, ensuring reliable electricity supply across the nation.
