Coal and Mining Sector

National Coal Index (NCI) surges this Month


From UPSC perspective, the following things are important :

Prelims level: National Coal Index

Mains level: NA

Central Idea

  • In a recent development, the National Coal Index (NCI) saw a substantial rise in September, marking its first increase since April 2023.
  • This surge in the NCI is linked to global coal price fluctuations and holds significant implications for India’s coal sector.

Understanding the National Coal Index (NCI)

  • What is it? The NCI is a price index which reflects the change in the price level of coal on a particular month relative to the fixed base year.
  • Release: It is released every month by the Ministry of Coal.
  • Launch: The NCI was introduced on June 4, 2020, as a tool to monitor coal price fluctuations relative to a fixed base year FY 2017-18.
  • Price Indicator: The NCI serves as a crucial price indicator that combines coal prices from various sources, including notified prices, auction prices, and import prices.
  • Basis for Premiums: It plays a vital role in determining premium rates, either on a per-tonne basis or through revenue sharing, using a market-based approach.

Components of NCI

  • Sub-Indices: NCI comprises five distinct sub-indices, encompassing three for Non-Coking Coal and two for Coking Coal. These sub-indices are amalgamated to derive the final Index for Non-Coking and Coking Coal, making them distinctly separate.
  • Customized Revenue Shares: Based on the coal grade associated with a mine, the relevant sub-index is employed to determine the revenue share.

Factors behind the NCI Surge

  • Global Price Impact: The recent uptick in the NCI is primarily influenced by a temporary rise in global coal prices, which has reverberated in the Indian coal market.
  • Seasonal Demand: With the festive season and winter approaching in India, the demand for coal has risen, prompting coal producers to boost domestic production to meet the growing energy needs.
  • Power Sector Growth: India has experienced a surge in coal demand, particularly from the power sector, driven by increased electricity requirements.
  • Continued Coal Imports: Power plants have continued to import coal as part of the coal blending mandate set by the power ministry.

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