Cabinet approves CoalSETU policy to allow flexible coal linkages for industry, export

The decision marks another major reform in the coal sector and aims to enhance flexibility, transparency, and efficiency in coal utilisation across industries.

The Union Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Shri Narendra Modi, has approved a new policy framework titled Policy for Auction of Coal Linkage for Seamless, Efficient and Transparent Utilisation (CoalSETU). The decision marks another major reform in the coal sector and aims to enhance flexibility, transparency, and efficiency in coal utilisation across industries.

Under the approved framework, a new window called the “CoalSETU window” will be created within the existing Non-Regulated Sector (NRS) Linkage Auction Policy of 2016. This new window will enable the allocation of coal linkages through an auction process on a long-term basis for any industrial use and export, without restricting coal usage to specific end uses. However, coking coal will not be offered under this window.

At present, the NRS linkage policy provides for auction-based allocation of coal linkages to specified end-user sub-sectors such as cement, steel (coking), sponge iron, aluminium, and other industries (excluding fertiliser–urea), including their captive power plants. These allocations are currently tied to defined end uses.

In view of evolving market dynamics, the government has decided to revisit the existing coal supply arrangements for the NRS. The objective is to improve ease of doing business, accelerate the utilisation of domestic coal reserves, and reduce India’s dependence on imported coal to meet energy and industrial demand. The new CoalSETU window aligns with earlier reforms that opened the coal sector to commercial mining without end-use restrictions.

Under the CoalSETU policy, any domestic coal consumer requiring coal for industrial use or export can participate in the auction, except coal traders, who are not permitted under this window. The existing auctions for specified end-user sub-sectors will continue alongside the new framework, and those specified end users will also be eligible to participate in the CoalSETU window.

Coal linkages obtained under this new window may be used for own consumption, export, coal washing, or any other purpose, except resale within the domestic market. Coal linkage holders will be permitted to export up to 50% of their allocated coal quantity. In addition, companies will have the flexibility to utilise the coal among their group entities as per operational requirements.

The policy also addresses the growing demand for washed coal. Allocation of coal linkages to washery operators is expected to increase the availability of washed coal domestically, reduce imports, and enhance export potential. Washed coal produced under this arrangement may also be exported, contributing to foreign exchange earnings and improved coal value chains.

Overall, the CoalSETU policy is expected to support industrial growth, strengthen energy security, improve utilisation of domestic coal resources, and promote transparency through competitive auctions, while ensuring alignment with India’s broader coal sector and ease-of-doing-business reforms.