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Current Affairs

National Coal Index

Date: 13 February 2021 Tags: Miscellaneous

Issue

 In order to arrive at the revenue share based on market prices of coal, the National Coal Index (NCI) has been conceptualized. 

 

Background
Ministry of Coal has started Commercial Auction of coal mines on revenue share basis. This has necessitated NCI.

 

Details

  • The NCI is a price index which reflects the change of price level of coal on a particular month relative to the fixed base year.

  • The base year for the NCI is FY 2017-18. Prices of coal from all the sales channels of coal, including import, as existing today are taken into account for compiling the NCI.

  • The amount of revenue share per tonne of coal produced from auctioned blocks would be arrived at using the NCI by means of defined formula.

  • NCI is composed of a set of five sub-indices: three for Non Coking Coal and two for Coking Coal.

  • The three sub-indices for Non Coking Coal are combined to arrive at the Index for Non Coking Coal and the two sub-indices for Coking Coal are combined to arrive at the Index for Coking Coal.

  • Indices are separate for Non-coking and Coking Coal. As per the grade of coal pertaining to a mine, the appropriate sub-index is used to arrive at the revenue share.

  • The index will be used to calculate the amount of performance security companies need to pay after winning coal blocks, and will also have a bearing on prices of coal to be sold from these mines.

  • Not only fully explored coal blocks, but also partially explored ones will now be auctioned for commercial mining, and 50 assets will go under the hammer soon.