CoalSETU will drive regulation towards commodification of coal from its nationalised mineral roots
On December 12, 2025, the Centre approved the Policy for Auction of Coal Linkage for Seamless, Efficient & Transparent Utilisation (CoalSETU) subject to final legislative approval of Parliament after the expiry of the public consultation period in 2026.
The policy introduces a new “CoalSETU window” under the existing Non-Regulated Sector (NRS) Linkage Auction Policy of 2016. It enables allocation of coal linkages on a long-term, auction basis for any industrial use or export. The key change brought in via the policy is the removal of specific end-use restrictions, enabling captive mine holders to sell excessively mined coal into the open market, including export of domestic coal. The management of the new portal has been handed over to the Coal Controller Organization as part of the gazetted notification issued by the government.
Coal policy transition
Coal is the bedrock of India’s economic growth story as it continues to power above 70 per cent of the country’s electricity, while being a key resource of major industrial sectors. With an energy transition in the offing, coal’s role is transitioning from a national mineral to mineral commodity of industrial use. To enable this, the sector has undergone major reforms in recent times.
The New Coal Distribution Policy (NCDP), issued in October 2007, restricted coal supply through Fuel Supply Agreements (FSAs) allocated via a nomination-based approach. Though, in Manohar Lal Sharma v. The Principal Secretary (2014), the Supreme Court of India cancelled the allocation of 204 coal blocks, marking a decisive shift in the approach to coal block allocation and underscoring the need for greater transparency and fairness in the process. The Coal Mines (Special Provisions) Act, 2015, subsequently introduced an auction-based regime for coal block allocation, opening the sector to private participation through public auctions, while prescribing specific eligibility conditions and exclusions for different categories of coal blocks. The reform blocked prior allottee entry without the required financial payouts.
In 2016, the NRS Coal Linkage Auction Policy was rolled out, which allowed auction-based coal linkages only for specific sectors like cement, steel, sponge iron, and aluminium (excluding urea fertiliser units) and their captive power plants, with usage restricted to designated end uses. Furthermore, in 2017, the SHAKTI (Scheme for Harnessing and Allocating Koyala Transparently in India) policy enabled the auction-based system. Under the scheme, new coal linkages were allocated either at notified prices to government generators or through competitive auctions for private power producers, with tariff-based bidding determining allocation. The framework enables future linkages for plants without Power Purchase Agreements, subject to subsequent commissioning and fulfilment of contractual conditions.
In 2021, foreshadowing the newly announced CoalSETU, the Mines and Minerals (Development and Regulation) Amendment Bill was introduced, which allowed any lessee using coal or lignite for captive purposes to sell up to 50 per cent of their annual production after fulfilling the requirements of the linked end-use plant.
New CoalSETU policy
In the public consultation document issued by the Union Ministry of Coal regarding the new policy amendment, it cites the legacy stocks accumulated in captive mines due to non-use at their predetermined end use as the key reason for relaxation of restrictions on end use. Under the new policy, existing captive mines will be able to sell their stock in the open market without restriction on end-use utilisation. Thus, long-term coal linkages will now be auctioned for any industrial use or for export through a new window or sub-sector.
This aligns with the opening of the coal sector for commercial mining, where coal blocks are allocated without end-use restrictions. The existing auction process for specific end-use sectors in the NRS will continue as usual, and those end-users can also take part in the new window. The coal obtained through this system may be used for captive consumption or exported up to 50 per cent of the allotted quantity. The coal linkage holders may also share or allocate coal among their group of companies. However, coal cannot be resold in India unless transformed into washed coal.
Indian coal, now free from export restrictions from captive mine holders of G6-G14, currently trades between 17.53- 61.43 (USD per tonne). The international price of coal is much higher and currently trades at 94.50 (USD per tonne). Removal of export restrictions enables captive mine lease holders to leverage the new policy for coal exports.
Coal sold under the new window can be used domestically after beneficiation or coal washing. The government expects this flexibility to boost policy uptake and reduce reliance on imports. Additionally, washed coal can be utilised as a commodity for export.
Moreover, auctioned mines will now have an extended life of up to 50 years, rising from the existing 30 years lease. The lease holders will be able to continue utilisation of the mine without any renewal obligations. A review of the existing area limits for mining operations is underway, and with the recent amendment to Section 6(1) of the MMDR Act, the permissible area for coal blocks in Madhya Pradesh has been increased from 35 square kilometres to 125 square kilometres.
The current policy nexus is driving regulation towards commodification of coal from its nationalised mineral roots.