Fuel consumption during high temperature induration is one of the principal reasons for the cost intensiveness of the iron ore pelletisation process. While magnetite ore is oxidised to hematite during induration at high temperature and provides internal heat energy to the pellet, there is hardly any internal heat generation. Furthermore, magnetite is prone to form diffusion bonds at 950–1200°C, whereas with hematite ore, the diffusion bonding is much less at that low temperature and so requires very high temperature of induration (around 1300°C or above) and hence consumes more energy. In this study, the external heat energy in pellets has been supplied by adding coke fines as a source of carbon which is oxidised to CO or CO₂ producing in situ heat to the pellets and also reduces a part of the hematite to magnetite during induration. These help in bond formation and lowering the external energy requirement. The study has been carried out with varying carbon percentage (0–5%) and the effect of carbon and its optimisation level has been determined. Up to 2% carbon has been found to be optimum to improve cold crushing strength, porosity, reducibility and decrease the reduction degradation index of pellets, as well as reduce the requirement of induration furnace temperature by 80°C and considerably decrease fuel consumption. However, excess addition of carbon increases the porosity markedly and reduces pellet strength.