About National Coal Index (NCI)
- November 9, 2023
- Posted by: OptimizeIAS Team
- Category: DPN Topics
About National Coal Index (NCI)
Subject :Economy
Section: Msc
The National Coal Index (NCI) has observed a slight increase of 3.83 points, reaching 143.91 in September 2023, marking the first surge since April 2023. This upturn can be attributed to the temporary escalation of coal prices in the global markets.
The upward movement of the NCI signals a growing demand for coal, likely due to the approaching festive season and winter in the country. This development is expected to encourage coal producers to expand domestic coal production to meet the increasing energy requirements.
The National Coal Index (NCI) is a critical price index that serves to reflect the changes in the price level of coal during a specific month in comparison to the fixed base year, which is FY 2017-18. Rolled out on June 4, 2020, the NCI was conceptualized with the primary objective of providing an accurate representation of the market price of coal.
Launched by the Ministry of Coal on June 4, 2020, the NCI serves as a price index that reflects the fluctuations in the price of coal in a particular month compared to the fixed base year. It plays a crucial role in determining the Premium (per tonne) or Revenue Share (as a percentage) through a market-based mechanism.
Ministry of Coal has started Commercial Auction of coal mines on revenue share basis.
The NCI is designed to encompass all transactions of raw coal in the Indian market, covering various grades of coking and non-coking coal traded in both regulated (power and fertilizer) and non-regulated sectors. It includes transactions at the notified price, coal auctions, and coal imports.
The implementation of the NCI brings forth several benefits, including its role as a foundational indicator for taxation purposes.
The NCI encompasses prices from various sales channels, such as Notified Prices, Auction Prices, and Import Prices, and is updated on a monthly basis.
Components of NCI:
- Sub-indices: The NCI is composed of five sub-indices, including three for Non-Coking Coal and two for Coking Coal. The three sub-indices for Non-Coking Coal are combined to derive the Non-Coking Coal Index, while the two sub-indices for Coking Coal contribute to the Coking Coal Index. Each sub-index accounts for specific grades of coal.
Implementation of NCI:
- Revenue Share Calculation: The NCI is used to determine the revenue share per tonne of coal produced from auctioned blocks, calculated using a predefined formula. The index covers all transactions of raw coal in the Indian market, encompassing various grades of coking and non-coking coal in both regulated (power and fertilizer) and non-regulated sectors. Washed coal and coal products are excluded from the index.