Coal distribution in India has evolved over the past decade from a system largely based on nomination-linked allocations to a broader framework involving long-term supply agreements, competitive auctions, digital platforms and greater flexibility for consumers.
Coal India Limited (CIL), the country’s largest coal producer, now supplies different categories of consumers through multiple channels designed to meet long- and short-term requirements.
For the power sector, Fuel Supply Agreements (FSAs) remain the primary mechanism for long-term coal availability. The introduction of the SHAKTI policy in 2017, followed by its revision in 2025, provided a more transparent and competitive framework for coal allocation to power producers.
For non-power consumers, linkage auctions introduced in 2016 enabled industries such as cement, steel, sponge iron and captive power producers to secure long-term coal supplies through a competitive mechanism. Cumulative power-sector linkages currently stand at around 643 MT, while non-power linkages are around 119 MT.
Short-term requirements are met through e-auctions, in which consumers, traders and exporters can participate on a common platform. The mechanism caters to short-term demand and supports the development of spot markets. Smaller MSME consumers requiring less than 10,000 tonnes annually can also access coal through State-Nominated Agencies (SNAs).
Together, these channels have expanded the flexibility of the coal distribution system and enabled supply mechanisms to cater to varying consumer requirements.
Simplifying coal procurement
CIL has also introduced changes aimed at making coal procurement more efficient and consumer-friendly.
Under the revised power-sector FSAs, contracts are based on the delivery of a fixed amount of Gross Calorific Value (GCV), rather than solely on the tonnage of coal supplied. CIL has also reduced the interest rate on delayed payments from around 14.65 per cent to about 8.25 per cent, easing the financial burden on power producers.
Since 2014, CIL has rationalised around 105 MT of coal linkages, with potential annual savings of more than Rs 7,500 crore for the power sector through reduced transportation costs and more efficient utilisation of domestic coal.
For non-power consumers, measures including electronic bank guarantees, pre-auction coal-quality testing, registration of multiple end-use plants under a single bidder ID and greater choice of transportation modes have simplified the procurement process.
Digital systems have also become an integral part of coal distribution. Online information and reconciliation systems, integration of third-party sampling agency portals with buyers and sellers, grievance-redressal platforms, SAP integration, customer interfaces and integration with railway portals have streamlined interactions among producers, consumers and logistics providers.
Expanding mine-to-market connectivity
Coal production is only one part of the supply chain, with evacuation and transportation playing an equally important role in ensuring timely delivery to consumers.
Rail-based dispatch increased from 272.9 MT in 2015-16 to 414 MT in 2025-26, a rise of around 52 per cent. Average rake loading increased from about 212.8 rakes per day to 338 rakes per day, representing growth of nearly 59 per cent.
Road-based dispatch to consumers located near mines increased from 156.1 MT to 221.8 MT during the period, while movement through Merry-Go-Round (MGR) systems rose from 92.3 MT to 97.1 MT.
The next phase of capacity expansion is focused on First Mile Connectivity (FMC), mechanised loading, silos and multimodal logistics. CIL has undertaken 72 FMC projects with a planned capacity of 843 MT.
Along with 20 existing CHP-silos with a combined capacity of 151 MT, mechanised and rapid-loading capacity is expected to reach around 994 MT by 2028-29.
The investments are aimed at making coal evacuation faster and more reliable while aligning transportation infrastructure with future production levels.
An evolving distribution framework
Coal distribution has increasingly moved beyond allocation towards an integrated system linking production, supply, logistics, infrastructure and consumer requirements.
Digital systems, competitive allocation mechanisms and investments in evacuation infrastructure are helping improve transparency, efficiency and flexibility across the supply chain.
As India’s energy demand grows, the evolving mine-to-market network is expected to support more reliable coal supplies while improving the efficiency of logistics and procurement across sectors.
