Multi-Commodity Exchange of India Ltd (MCX) and MJunction Services Limited will be entering into a Memorandum of Understanding (MoU) with the intention of setting up a Joint Venture (JV) for starting a Coal Exchange in India.
The decision is of historical significance and signals the entry of the domestic coal industry into a transformative phase. It indicates the government’s intent to relinquish control over one of the most heavily regulated sectors in the country making it more competitive and transparent.
The setting up of an exchange will facilitate an open platform mechanism for private commercial players whose functioning will be guided by market supply and demand forces. The move is likely to signal the end of the market domination of Coal India and the termination of the Fuel Supply Agreement (FSA) regime wherein buyers had to sign supply contracts with the state-run coal miner. As the sector becomes increasingly decentralized, more buyers and sellers will be able to avail the benefits of real-time pricing.
The project shall be set up subject to regulatory approvals and both project partners will undertake feasibility studies to ascertain the viability of the project. MJunction is a joint venture between Steel Authority of India Limited (SAIL) and Tata Steel.
