With instances of coal quality degrading by as much as 30% in the recent past, resulting in cost markups of 61%, it is clear that coal quality challenges not only persist in India’s power sector but are also significant. 

The assessed coal quality (measured as gross calorific value) drives the price and quantity of coal required for electricity generation, and in turn, influences coal-based power tariffs. Persistent weaknesses in quality assessment and lax regulatory oversight often lead to coal being priced at a significantly higher grade than what is used. This impacts consumer electricity tariffs, resulting in overpayment for inefficiencies. Since coal-based generation accounts for over 70% of India’s electricity, and is likely to remain significant in the near to middle term, addressing this challenge in a timely manner is pertinent. 

This report analyses the causes contributing to the discrepancies in coal-quality assessment and treatment across the coal supply chain. It posits that weaknesses in the coal sampling process and the regulatory methodology of tariff determination form the crux of the challenge. The study proposes concrete measures to strengthen the sampling process and quality assessment at the mine end, and an alternative regulatory consideration of coal-quality towards consumer tariffs. Such measures can improve efficiency and transparency in coal grade measurement and consideration, while balancing the interests of coal suppliers, power generators, and consumers, and potentially leading to savings of thousands of Crores to the economy.