Note4Students

From UPSC perspective, the following things are important :

Prelims level: National Coal Index

Mains level: NA

The Ministry of Coal has launched the sixth round of commercial coal mines’ auction for 141 coal mines.

What is the news?

As per the provisions of the tender document, the Performance Bank Guarantee (PBG) to be submitted for each successfully auctioned coal mine is to be revised annually based on the National Coal Index (NCI).

What is National Coal Index (NCI)?

Ministry of Coal has started commercial auction of coal mines on revenue share basis.
In order to arrive at the revenue share based on market prices of coal, one National Coal Index (NCI) is conceptualized.
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.
NCI is a price index combining the prices of coal from all the sales channels- Notified Prices, Auction Prices and Import Prices.
It is released every month.

The concept and design of the Index as well as the Representative Prices have been developed by the Indian Statistical Institute, Kolkata.
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.
Thus, 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 amount of revenue share per tonne of coal produced from auctioned blocks would be arrived at using the NCI by means of a defined formula.
The Index is meant to encompass all transactions of raw coal in the Indian market.
This includes coking and non-coking of various grades transacted in the regulated (power and fertilizer) and non-regulated sectors.
Washed coal and coal products are not included.