Indian Government lifts restrictions on coal purchases for power plants

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In a significant move to bolster energy security, the Ministry of Coal announced the removal of restrictions on coal purchases for thermal power plants, ensuring uninterrupted supply to meet the nation’s growing electricity demands.

The decision, rooted in the Shakti Policy (2017), replaces the earlier New Coal Distribution Policy (2007) and allows coal companies to supply fuel as per the full Power Purchase Agreement (PPA) requirements, irrespective of Annual Contracted Quantity (ACQ) levels.

Key Policy Changes

Under the revised framework, coal supply to power plants will be governed by Fuel Supply Agreements (FSAs), with pricing determined by commercial terms and notifications from Coal India Limited (CIL) and Singareni Collieries Company Limited (SCCL). Additionally, coal is being made available through Single Window e-auctions, catering to all sectors, including power.

Record Coal Production

The government emphasized its focus on ramping up domestic coal production, citing record output of 997.83 Million Tonnes (MT) in 2023-24. Provisional data for 2024-25 (up to February) shows a 5.45% growth, with production reaching 929.15 MT compared to 881.16 MT in the same period last year.

Steps to Boost Production

To ensure sustained availability, the Ministry of Coal has implemented several measures, including:

1. Policy Reforms: Enactment of the MMDR Amendment Act (2021), allowing captive mines to sell up to 50% of coal in the open market.
2. Auction of Commercial Mining: Liberal terms, including incentives for early production and coal gasification, with 100% FDI permitted.
3. Technology Adoption: CIL is leveraging mass production technologies in underground mines and state-of-the-art equipment in opencast mines.
4. Infrastructure Development: SCCL is enhancing coal evacuation infrastructure with new plants and crushers.

Union Minister of Coal and Mines, Shri G. Kishan Reddy, shared these updates in a written reply in the Rajya Sabha, underscoring the government’s commitment to energy self-sufficiency.

For further details, refer to the Press Information Bureau release: MoC notice regarding removal of coal purchase restrictions.

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