India's coal procurement looks nothing like it did twenty years ago. What used to run on nomination and administrative discretion is now, in large part, run on auctions and tenders. The result is a system that prices coal more honestly and lets more players in the door.

From nomination to competition

For most of independent India's history, getting access to coal was a matter of who you knew and where you sat in the queue, not who bid the most competitive price. Under the New Coal Distribution Policy of 2007, a company received a Letter of Assurance through nomination, and if it hit its project milestones, that assurance turned into a Fuel Supply Agreement. It worked, more or less, back when supply pressures were lower. But price discovery was weak and the whole process was hard to see into from the outside.

That started to matter more as power demand climbed through the 2000s. Allocation didn't keep pace with actual need, and coal access drifted from being an efficiency question to a discretion question — which is part of why the system became a source of controversy.

SHAKTI changed the model

2017 is really the hinge point. SHAKTI — the Scheme for Harnessing and Allocating Koyala Transparently in India — swapped nomination for competitive allocation. Coal linkages that used to get assigned by committee started moving through auctions and tariff-based bidding instead.

The scheme did more than just change the mechanism, too. States could pool their power requirements and put them out to bid through a designated agency, and independent power producers holding competitive PPAs got a real path to domestic coal. Coal procurement, in short, stopped being something a bureaucrat decided and became something closer to a market.

Revised SHAKTI broadened access

In 2025, the Revised SHAKTI Policy tidied the system into two windows. Window-I keeps notified-price linkage for government-owned thermal plants. Window-II opens things up to any generating company willing to bid a premium over the notified price. What's notable here is that Window-II dropped the requirement to hold a PPA first — generators can lock in fuel now and figure out where to sell the power later.

That one change made the whole system more flexible, and it also opened the door to imported-coal-based plants where technically feasible, giving domestic coal a bigger role in cutting import dependence.

Reform beyond power

None of this is confined to power-plant coal, either. Commercial coal mining opened up in 2020, letting private firms mine and sell coal with no end-use restrictions, again through auction rather than allotment. Coking coal has followed a similar path toward auction-based linkage, which matters most for steel producers trying to import less.

Even coal washeries and idle mines have been swept into the same logic — tenders reviving assets that nomination-era rules would have just left sitting there. So the reform isn't really a pricing tweak at this point. It's become the operating logic for how India runs its coal value chain.

Why it matters

Practically, this changes how coal gets priced, allocated and moved. Auctions produce genuine price discovery, and matching plants to their nearest viable source cuts down on transport cost. For a stressed plant or a new project, the tender route is also just an easier way in than the old system ever was.

That doesn't mean every problem is solved. DISCOMs still pay late, logistics still bottleneck, and production still runs into constraints. But the allocation mechanism itself is a genuinely different animal from the nomination model of earlier decades.

Where the reform stands

By mid-2026 the reform had matured but hadn't finished evolving. Coal India kept expanding linkage auctions, opening supply to sponge iron and steel-linked buyers, and the premiums fetched at its e-auctions suggest demand is holding up. What hasn't fully followed, though, is production — in some cases output growth has lagged behind auction activity. That gap is probably the most honest lesson from India's coal modernisation: getting the allocation system right doesn't automatically get the coal out of the ground faster.

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