​Long overdue: On coal exchanges

Unveiled at a time of record domestic coal production, the Coal Exchange Rules, 2026 , are a case of better-late-than-never. They will create a broad market-based mechanism through regulated trading platforms for the lynchpin of India’s energy system — coal. They are aimed at enhancing price discovery, transparency, access for small consumers, as well as, one would hope, reduce bilateral agreements that are often opaque and come with a whiff of graft, too often. Today, most coal transactions between producers and buyers take place through long-term contracts, primarily for the power sector, followed by auctions, imports and captive mining. While India’s commodity exchanges are well established, they function largely as financial markets rather than physical delivery platforms. Coal exchanges, however, appear closer in design to power exchanges, which, despite modest volumes, play a role in price discovery, market signalling and the development of secondary markets. As if to prove this point, coal exchanges are expected to serve the non-regulated sector, which relies on Coal India auctions where coal is often sold at a premium to the highest bidder. Power exchanges are not merely niche trading platforms; they serve as points of reference for the broader power market. They have enhanced price discovery and served as a balancing market without replacing long-term power purchase agreements. Initially the power exchanges were only balancing shortages, but eventually the spot prices became a barometer of the broader power market indicating scarcity, surplus and system stresses for all electricity stakeholders. Perhaps the first role of coal exchanges could be to open up inventories, allowing surpluses to balance out shortages across India.