There is growing consensus among energy planners that electricity requirements in India would increase rapidly in the next couple of decades, and that coal would continue to dominate the generating capacity mix. Comparatively high levels of ash in Indian coal causes concern both in terms of the high costs of coal movement and the associated environmental impacts. As per the notification of September 1997, all power plants located in sensitive areas, metropolitan cities and in areas distant from the coalfields, must use coal with < 34% ash. However, little progress has been made towards coal beneficiation and some consumers have already started to import non-coking coal for blending in order to comply with environmental requirements. The importance of planning for optimal utilization and transportation of thermal coal cannot be underestimated, especially at a juncture where the Indian coal industry is already facing competition from rising imports of non-coking coal. This paper assesses the optimality of the current patterns of coal movement and examines the economics of beneficiating thermal coals. A linear programming model has been developed based on the framework of the general transportation problem. The authors conclude that the washery is not economically attractive given the current costs, beneficiation technique and quality of Indian non-coking coal. Model simulations have been attempted to assess the possibility of coal beneficiation based on techno-economic considerations rather than political or other considerations. The paper also stresses the possibility of overall gains to the economy by modifying the current patterns of coal movement.