India aims to launch its proposed coal exchange by the end of this year as part of plans to boost domestic coal sales and increase competition in the sector, additional secretary at the coal ministry Sanoj Kumar Jha has said.

Rules are being drafted and the regulatory framework finalised, he said in a virtual address to the Indian Coal Market Conference in Kolkata. The latest timeline indicates the government's intent to fast-track its plans for the exchange, which had been slated to make its debut early next year.

His comments came a day after state-owned Coal India (CIL), which accounts for 80pc of India's coal output, called for a phased and calibrated approach towards launching the exchange to ensure stability in the power sector. CIL wants liquidity on the exchange to be limited initially to surplus production in the country.

Jha said coal from commercial coal mines and spot volumes from CIL should provide the bulk of the exchange liquidity and help in transparent price discovery for domestic coal.

The coal sold by CIL under long-term fuel supply agreements to consumers including utilities would still continue under the present mechanism, although those sales could also come to the exchange in the future.

The ministry does not rule out coal exports or imports taking place on the exchange in the future, although the focus for now is on domestic coal, Jha said. The exchange would need three to four years to bed in and see its operations streamlined, as India pushes to usher in competition to provide quality coal to customers, Jha said.

The exchange would also provide a more open trading system compared with the current e-auction system, where sellers such as CIL and other state-owned mining companies determine the timing, volumes and location of their offers. An exchange-based mechanism would widen the participation pool, he said, drawing parallels with the development of India's power exchanges, which gained traction after initial scepticism.

The government recently published draft rules around the proposed exchange. It hopes the reforms will help boost the country's production and help to trim imports further.

India's thermal coal receipts fell by 3pc on the year to about 160mn t last year, a second straight year-on-year drop, according to data from shipbroker Interocean, amid weak utility demand and plentiful domestic coal.