Coal India Boosts Flexibility, Allows Linkage Coal Power Sale on Exchanges

Coal India has announced a major shift in policy, allowing power producers to sell electricity generated from linkage coal on power exchanges.

This strategic directive, and communicated through a company notice dated August 6, hopes to restore continuous coal demand to the power sector with consumption demands changing rapidly in unanticipated ways.

The policy announcement comes as coal-fired power plants across India take drawdowns on inventories while decreasing purchases from Coal India for fresh inventory.

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This is occurring despite ongoing increases in electricity demand; coal consumption for power generation has declined for four consecutive months. Opening linkage coal to the market should allow new purchasing momentum, and a steady flow off take of fuel exists with long-term contracts in place.

Industry participants suggest that the timing of the policy announcement and potential ramifications are good and in-market fashion; especially as utilities are looking for more flexible ways to manage rapidly increasing operational costs. The option to trade power generated from linkage coal offers generators commercial advantage and further strengthens systemic inventory deficiencies, while simultaneously ensuring a competition shifting advantage to normalizing energy-planning cycles.

Indeed, the policy shift may also reinforce Coal India's role in supply-demand balance for the ever-evolving energy landscape while assuring long-term viability of linkage contracts going forward.