India's Multi Commodity Exchange (MCX) and National Stock Exchange (NSE) have received approval from market regulator the Securities and Exchange Board of India (Sebi) to launch their respective coal exchanges.
The NSE received approval from the country's market regulator to invest in the proposed National Coal Exchange of India, marking a key regulatory milestone towards the establishment of a structured market platform for physical coal trading in India, the exchange said on 17 April.
The stock exchange will soon apply to the country's Coal Controller Organisation, an arm of India's coal ministry, to secure a licence to set up a coal exchange under relevant regulatory provisions, it added.
The proposed exchange is intended to facilitate electronic spot trading of coal through standardised contracts, enabling transparent price discovery and defined settlement mechanisms for market participants including producers, consumers and traders, the NSE said.
The initiative is aligned with the government's coal sector reforms, including commercial mining and liberalised coal sales, and is expected to support the development of a formal, transparent and efficient market structure for coal transactions, it added.
Meanwhile, the MCX — a commodity marketplace listed on the Bombay Stock Exchange — has secured the market regulator's approval to invest up to 1bn rupees ($10.74mn) in a proposed coal exchange, it said on 18 April.
The MCX — the country's largest commodity exchange — proposes to further improve market infrastructure by developing a regulated technology-driven market for buying and selling coal.
This will benefit the ecosystem given that the proposed coal exchange will be a transparent, standardised digital platform for physical delivery of coal at market-driven fair and robust prices, the company said. It intends to hold all of the venture's stakes during the initial stages before seeking partners.
Promoting competitive markets
More entities are expected to seek requisite approvals and participate in setting up coal exchanges.
Indian coal output crossed 1bn t in the April 2024-March 2025 financial year and is likely to grow to over 1.5bn t by 2030, the ministry said in its draft coal exchange rules in 2025.
Further reforms are being carried out in the sector with a focus on promoting competitive markets for sale of coal through proposed coal exchanges, the draft said.
The Indian coal market is currently dominated by state-controlled coal producers with long-term sales on a government-notified price accounting for the bulk of transactions.
Policymakers expect domestic coal supplies to increase with a steady uptick in production from coal blocks auctioned for commercial mining. The exchange could make coal transactions seamless and transparent as well as support domestic coal availability while trimming imports in the world's second-largest seaborne coal market.
The exchange would also provide a more open trading system compared with the current e-auction system, where sellers such as Coal India (CIL) and other state-owned mining companies determine the timing, volumes and location of their offers.
Coal from commercial coal mines and spot volumes from CIL should provide the bulk of the exchange liquidity and help in transparent price discovery, additional secretary at the coal ministry Sanoj Kumar Jha said in February.
The coal sold by CIL under long-term fuel supply agreements to consumers including utilities would continue under the present mechanism, but those sales could also come to the exchange in the future.
The ministry does not rule out coal exports or imports taking place on the exchange in the future, but the focus is on domestic coal for now, Jha said.
