Coal ministry proposes strict ownership, net worth norms for Coal Exchange

The coal ministry has proposed stringent eligibility and oversight rules for entities seeking to establish a coal exchange in the country. This includes a minimum net worth requirement of ₹100 crore, limits on equity ownership and mandatory demutualisation.

 

The revised Draft Coal Exchange Rules, 2025, released for public consultation, mandate that no member of a coal exchange can hold more than five per cent of its paid-up equity share capital individually. And, all members together cannot own more than 49 per cent.

 

Further, persons other than members will not be allowed to hold more than 25 per cent equity after five years of authorisation.

 

Under the draft framework, the applicant must be a demutualised company incorporated under the Companies Act, 2013.

 

A demutualised company is one that has transformed from being owned by its private members into a shareholder-owned business, separating ownership from trading rights.

 

The rules envisage tightly-regulated market architecture.

 

A coal exchange must maintain a minimum net worth of ₹100 crore at all times, with the Coal Controller Organisation appointed as the authority to register and regulate exchanges.

 

Registration will be valid for 25 years, and renewal may be granted for a further 25 years.

 

Any existing electronic coal trading platform must seek registration within six months after the first coal exchange becomes operational or they will cease to exist.

 

The draft rule has made a settlement guarantee fund compulsory to ensure settlement of trades executed on the platform.

 

At least 50 per cent of the fund will need to be invested in safe and liquid instruments such as public sector bank deposits, treasury bills or government securities.

 

The exchange will be required to distribute a minimum of 70 per cent of the return earned on the initial security deposit to members.

 

It also mandates separate mechanisms for risk management, clearing and settlement, and grievance redressal.

 

The rules permit default declarations against members unable to meet settlement obligations.

 

The draft also lays out detailed market surveillance and intervention provisions.

 

Circular trading, insider trading, cartelisation, market manipulation and abuse of dominant position have been expressly identified as violations.

 

The authority will have powers to impose penalties, debar members, suspend contracts, cap or floor prices, and halt transactions in the event of abnormal price movements or sudden spikes in volumes.

 

It may also issue interim orders to prevent continued contravention of the rules during investigation.

 

The rules prescribe an electronic trading system with automated audit trails, periodic IT audits, cyber-security frameworks and disaster recovery systems.

 

Exchanges will be required to publicly disclose prices, volumes, aggregate demand and supply curves, and maintain records.

 

The revised draft has been opened for stakeholder comments for 30 days from publication.