From UPSC perspective, the following things are important :
Prelims level : National Coal Index
Mains level : NA
- 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.