New Delhi: Every unit of electricity, every industrial process and every tonne of steel or cement produced is supported by a complex energy supply chain. At the centre of this chain is the movement of coal from mines to consumers, supported by a distribution system that has evolved significantly over the past decade.
Coal India Limited (CIL) has transformed its coal distribution framework from a system largely based on traditional linkages allocated on a nomination basis into a more diversified model featuring long-term supply agreements, competitive auctions, digital platforms and greater flexibility for consumers.
The changes have been aimed at improving transparency, strengthening supply assurance and making coal procurement more efficient across different sectors of the economy.
Coal Distribution Shifts From Allocation to Competitive Mechanisms
Coal distribution has gradually moved beyond a traditional allocation-based system, with different supply channels now designed to meet the requirements of various categories of consumers.
For the power sector, Fuel Supply Agreements (FSAs) continue to provide the foundation for long-term coal availability. The introduction of the SHAKTI policy in 2017, followed by its revision in 2025, brought greater transparency and competitiveness to coal allocation for power producers.
For non-power consumers, linkage auctions introduced in 2016 created a competitive mechanism for industries such as:
- Cement
- Steel
- Sponge iron
- Captive power
- Other industrial consumers
According to the information provided by CIL, cumulative linkages currently stand at around:
- Power sector: 643 MT
- Non-power sector: 119 MT
This diversified system allows long-term demand to be addressed through linkages and FSAs, while short-term requirements can be met through auction-based mechanisms.
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E-Auctions Provide Flexible Access to Coal
CIL’s e-auction mechanisms have created a common platform where different categories of consumers can participate in the procurement process.
The auction framework allows consumers, traders and exporters, among others, to participate, helping meet short-term coal requirements while supporting the development of dynamic spot markets.
For smaller consumers, particularly MSME consumers requiring less than 10,000 tonnes annually, coal can also be accessed through State-Nominated Agencies (SNAs).
Together, these channels provide different options based on the volume, duration and nature of coal requirements.
FSA Reforms Improve Supply and Financial Flexibility
CIL has also introduced changes in its Power FSAs to make coal supply contracts more responsive to consumer requirements.
For the first time in the country, the revised Power FSAs provide for delivery of a fixed amount of Gross Calorific Value (GCV) to consumers, instead of contracts being based primarily on the tonnage of coal supplied.
Another major change has been the reduction in interest rates on delayed payments. According to CIL, the rate has been reduced from around 14.65% to about 8.25%, helping ease the financial burden on the power sector and improve liquidity.
Coal Linkage Rationalisation Saves Transportation Costs
Since 2014, CIL has rationalised around 105 MT of coal linkages.
The rationalisation has the potential to generate annual savings of more than ₹7,500 crore for the power sector, primarily through lower transportation costs and more efficient utilisation of domestic coal.
The exercise is part of efforts to align coal sources more efficiently with consumer locations and reduce unnecessary movement across longer distances.
Digital Systems Transform Coal Procurement
Technology has become an important part of CIL’s evolving distribution framework. Several digital systems have been introduced to simplify interactions between producers, consumers and logistics service providers.
For non-power consumers, measures include:
- Electronic Bank Guarantee (e-BG) facilities
- Pre-auction coal-quality testing
- Registration of multiple end-use plants under a single bidder ID
- Greater choice of transportation modes
- Online information systems
- Online reconciliation facilities
- Grievance-redressal portals
- SAP integration
- Customer-facing digital interfaces
- Integration with Railways portals
- Integration of Third-Party Sampling Agencies’ portals with buyers and sellers
These systems are aimed at making coal procurement more transparent, accessible and easier to manage.
Rail-Based Coal Dispatch Rises 52% in a Decade
Coal distribution also depends heavily on evacuation infrastructure and transportation capacity. CIL has expanded its dispatch capabilities across different modes over the past decade.
Rail-mode dispatch increased from 272.9 MT in FY 2015-16 to 414.0 MT in FY 2025-26, representing growth of around 52%.
Average rake loading also increased substantially:
- FY 2015-16: Around 212.8 rakes per day
- FY 2025-26: Around 338 rakes per day
- Growth: Nearly 59%
Road-based dispatch for consumers located near coal mines increased from 156.1 MT to 221.8 MT during the same period.
Movement through Merry-Go-Round (MGR) systems also increased from 92.3 MT to 97.1 MT.
First Mile Connectivity to Strengthen Coal Evacuation
CIL is now focusing on First Mile Connectivity (FMC), mechanised loading, silos and multimodal logistics to further improve the movement of coal from mines.
The company has undertaken 72 FMC projects with a planned capacity of 843 MT.
In addition, CIL has 20 existing CHP-silos with a capacity of 151 MT.
Together, mechanised and rapid-loading capacity is expected to reach around 994 MT by FY 2028-29.
These infrastructure investments are intended to:
- Speed up coal evacuation
- Improve reliability of dispatch
- Reduce dependence on conventional loading systems
- Support future production levels
- Improve integration between mining and logistics
Building an Integrated Mine-to-Market Coal Network
Coal distribution today extends beyond simply allocating coal to consumers. It involves coordination across production, supply agreements, procurement, transportation, evacuation infrastructure and consumer requirements.
CIL’s evolving framework brings together these elements through:
- Long-term supply arrangements
- Competitive linkage auctions
- E-auctions
- Digital procurement systems
- Rationalised coal linkages
- Expanded rail and road dispatch
- First Mile Connectivity projects
- Mechanised loading and silo infrastructure
The integration of these systems is aimed at enabling coal supplies to respond more efficiently to changing demand across sectors.
Coal Distribution Supports India’s Growing Energy Needs
As India’s electricity and industrial requirements continue to expand, an efficient coal distribution system remains an important part of the country’s energy supply chain.
The evolution from traditional allocation mechanisms towards a combination of linkages, auctions, digital systems and modern evacuation infrastructure reflects CIL’s efforts to make coal supply more transparent, flexible and efficient.
With its expanding mine-to-market network, CIL continues to strengthen the movement of domestic coal from production centres to consumers, supporting the country’s energy and economic requirements.
Key Highlights of CIL’s Coal Distribution Transformation
- Power-sector coal linkages: Around 643 MT
- Non-power coal linkages: Around 119 MT
- Coal linkages rationalised since 2014: Around 105 MT
- Potential annual power-sector savings: More than ₹7,500 crore
- Rail dispatch: 272.9 MT in FY16 → 414.0 MT in FY26
- Average rake loading: 212.8 → 338 rakes per day
- FMC projects: 72
- Planned FMC capacity: 843 MT
- Existing CHP-silo capacity: 151 MT
- Expected mechanised and rapid-loading capacity by FY29: Around 994 MT
About Coal India Limited
Coal India Limited (CIL) is a Maharatna public sector enterprise under the Ministry of Coal, Government of India and is engaged primarily in coal mining and production. Through its extensive mining, supply and transportation network, CIL supplies coal to key sectors including power, steel, cement and other industries, supporting India’s energy and industrial requirements.
