India's state-controlled Coal India (CIL) has called for a phased implementation of the proposed domestic coal exchange, emphasising the need for a calibrated transition to ensure stability in the power sector and the wider economy.

The proposed exchange should be introduced in a calibrated manner, initially limited to surplus production in the country, catering to non-power sector demand, CIL executive director VS Maharaj said at the India Coal Markets Conference in Kolkata. There could be more than one exchange and the trading mechanism along with contracts would evolve in due course.

His comments come after Delhi recently published draft rules around the proposed exchange, with policy makers expecting it to start operations over the next year as part of broader plans to further liberalise the government-dominated sector and have market-based coal price discovery, as commercial coal output is expected to expand in coming years. The government hopes that the reforms could help boost the country's production and trim imports further.

CIL, which accounts for 80pc of India's coal output, would be a key market maker on the exchange. It typically sells the equivalent of 20pc of its annual sales through electronic platforms, and that amount could move to the exchange. Coal sales by commercial mines could also provide sizeable liquidity for the exchange.

The company said the volumes it sells under long-term contracts should be kept out of the exchange's remit. The supplies under the term deals or so-called fuel supply agreements go mainly to utilities and underpin regulated power generation and keep power prices in check.

A sudden exposure to full market volatility might increase electricity tariff fluctuations, he said. This could affect power generators' long-term financial planning, he added.

CIL believes liquidity should not be a challenge for the exchange, although the company is open to addressing concerns around coal quality. He said CIL is open to a competitive coal sector and would strengthen grade assurance, expanding third-party sampling and analysis protocols and enable real-time monitoring of coal quality at pitheads and automating logistics.

"CIL is not averse to competition," he said, adding that modernisation and market development should proceed without compromising energy security or power sector stability.

He added that the exchange must operate under strong regulatory oversight with safeguards against speculative activity and clear dispute resolution mechanisms for grade and quantity.

Exchange participation

Several entities are expected to look at participating in setting up the exchange. Representatives from PTC India, Multi Commodity Exchange of India and Hindustan Power Exchange attended the conference.

E-auction platform Mjunction Services said it intends to apply to become an exchange.