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.

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.

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.