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.

The templates for the two exchanges are not very different though the specific rules framed by the Coal Controller Organisation of India will determine the success of coal exchanges. Just as with the successes, the failures of power exchanges can also serve as lessons learned for coal. Coal is not as fungible as electricity, which once generated is the same everywhere requiring only minimum standards. Coal quality varies widely. Therefore, robust standards and quality assurance are as important as contract design, liquidity creation and enforcement. The latter set of requirements will ensure that major producers and consumers are drawn to the coal exchanges. The emphasis should be on facilitating participation of retail consumers unlike power exchanges, which are dominated by discoms. Coal India’s stance will be crucial. Besides safeguards against volatility, dispute resolution mechanisms and improved transportation logistics will be important too, since the coal exchanges will be physical delivery platforms.

Paving the way for establishing coal exchanges in the country, the government on Tuesday (June 9, 2026) published the Coal Exchange Rules (2026) – formally putting down rules and eligibility criteria for operating and instituting the exchange.

Prominently among them are statutory regulations about payment and settlement of contracts, minimum eligibility requirements to be met for an entity to establish the exchange and its governance structure, among other things.

The Coal Ministry, in a statement, held that the coal exchange would mark a “paradigm shift” in coal marketing by enabling multiple sales channels, that is, from ‘one-to-many’ to ‘many-to-many’.

“This will enable transparent and market-driven price discovery, improve efficiency, and provide coal producers, including commercial and captive miners, with easier access to a wider pool of buyers,” the statement read.

The published rules outline that an applicant seeking to establish a coal exchange must have a net worth of “not less than fifty crore rupees”.

Further, they must adhere to being ‘demutualised’, that is, the ownership and management do not hold any trading rights in the exchange.

As the settlement of contracts, the rules put forth that the final price of the traded coal be adjusted in accordance with the quality of coal being traded, which shall be assessed by any coal sampling agency recognised by the Coal Controller Organisation (CCO).

The Coal Ministry had appointed CCO as the authority to register and regulate the exchanges on December 11, 2025.

It was entrusted with registering and revoking registrations, market oversight and surveillance over the activities of exchanges, notifying guidelines and procedures for settling disputes and placing grievances, among other things.

Progressing further towards establishing the proposed coal exchange, the Central Government vide a gazette notification Thursday (December 11) appointed Coal Controller Organisation (CCO) as the authority to register and regulate the proposed coal exchanges.

The Coal Ministry had proposed appointing CCO as the regulator for the proposed coal exchange in September this year. The draft legislation had entrusted CCO with registering and revoking registrations, notifying fees and other charges necessary for exchange operations, market oversight and surveillance over the activities of exchanges, notifying guidelines and procedure for settling disputes and placing grievances, among other things.

The idea of setting up a coal exchange is premised around an increased availability of coal in the country. The coal ministry believes the mechanism would help address the surplus coal scenario by expanding further the existing channels for selling coal. Thus, also instituting an additional competitive market for its sale. In FY 2024-25, India produced 1.05 billion tonnes of coal. According to government estimates, domestic coal production is expected to increase 6-7% annually in the coming years to scale an annual production of 1.5 billion tonne by 2029-30.