India must combine policy cohesion with coal supply efficiency for better economic outcomes

No doubt, its remit warrants deeper consultation with the sector’s anchor, the ministry of power (MoP). Solar projects have come up but are unable to despatch electricity on account of inadequate evacuation facilities, a subject that is squarely within the MoP’s ambit. It oversees transmission plans.

However, inter-ministry engagements must be under the Executive’s aegis. The MNRE’s plea to let it directly engage the sector’s regulator—a quasi-judicial authority—for issuing directives cannot be entertained. Grid responsibility lies firmly with the MoP and regulatory orders should not splinter.

Policy cohesion is critical under today’s global circumstances that highlight the need for integrated energy planning, better subsidy management and appropriate regulation. In this context, there are several gaps that could be closed—especially in the coal sector, which accounts for more than half our primary mix of energy sources.

There is much to be desired in smooth supplies of coal to power plants, which supply over 70% of India’s electricity. Coal makes up more than 70% of the cost of such power generation. This burden should be eased to make space for lower consumer tariffs. Avenues for cost compression exist. About 60% of those plants are located at a distance away from coal mines, requiring railway haulage.

But Indian Railways over-charges coal carriage to cross-subsidize passenger travel. This needs to change. Coal suppliers also need an efficiency overhaul. As Indian coal is burdened with high ash content compared to imports, waste makes up much of what they sell, raising not just freight costs but also the maintenance bills of thermal plants that find ash deposits reducing their efficiency in converting heat to electricity.

To fix this problem, coal companies must set up washeries—their existing capacity is negligible—to scrub off the ash before despatching coal. On its part, the Railways should gradually raise sleeper-class passenger fares through the year. There have been only two fare hikes in the past five years. The last one was in December 2025, but it still left sleeper-class railway travel priced around 45% below its estimated cost.

Since alternate modes of haulage are far more expensive, especially as fuel costs for road transport rise, the political challenge should not be all that hard to tackle. The global oil sector has suffered its biggest disruption in history. Even as we seek to diversify our sources of supply for the sake of energy security, railway users would understand the need for all-round burden sharing.

Importantly, the government must promote coal gasification. This process serves the twin objectives of energy security and lower carbon emissions. The use of gas derived from coal can help replace imports and also support our net-zero efforts.

Finally, we must recognize that the global oil-price contagion has spread to the coal sector as well, with prices galloping up since the war in West Asia began. Countries are firing up their coal plants to cover oil shortfalls and price spurts, raising demand.

For political reasons, India has held coal prices steady. Since state-owned companies dominate domestic production, this is easy for the Centre to do. But this embedded subsidy offered by coal producers needs to go, with the money used instead as a financial incentive aimed at electricity distribution companies to hasten reforms in this sector.