Understanding National Coal Index (NCI)

Description

National Coal Index (NCI)

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Context

The National Coal Index (NCI) has experienced a notable decline of 48% in June 2024, reaching 142.13 points on a provisional basis.
This marks a drop from 25 points in June 2023, reflecting a substantial availability of coal at lower prices in the domestic market.

Details

Coal Auction Premium

The decline in the premium on coal auctions underscores the ample availability of coal.
This sharp reduction confirms that the market is well-supplied, aligning with the trends indicated by the NCI.

Growth in Coal Production

India's coal production saw a significant increase of 58% in June 2024 compared to the same period last year.
Production rose to 71 million tonnes (MT) from 73.93 MT.
This growth is critical for ensuring a stable supply to sectors dependent on coal, enhancing the nation's energy security, according to the Coal Ministry.

Market Equilibrium and Future Outlook

The downward trend in the NCI suggests a more balanced market, aligning supply with demand.
With adequate coal availability, the country can meet rising demands and secure its long-term energy needs.
This development supports a resilient and sustainable coal industry, fostering a prosperous future for the nation.

The downward trajectory of the NCI signifies a more equitable market, harmonizing supply and demand dynamics. With sufficient coal availability, the nation can not only address burgeoning demands but also underpin its long-term energy requisites, thereby fortifying a more resilient and sustainable coal industry and fostering a prosperous future for the nation.

Understanding the National Coal Index

The National Coal Index (NCI) is a comprehensive price index that aggregates coal prices from various sales channels—Notified Prices, Auction Prices, and Import Prices.
It includes prices of both coking and non-coking coal across regulated (power and fertilizer) and non-regulated sectors.
Established with a base year of FY18, the NCI provides valuable insights into market dynamics and price fluctuations.
The NCI is published by the Ministry of Coal on a monthly basis.

Notified Prices

Notified Prices refer to the official prices set and announced by coal-producing companies or authorities for various grades of coal. These prices are fixed for different sectors and purposes, such as regulated sectors (e.g., power generation) and non-regulated sectors (e.g., steel manufacturing). Notified Prices are used as a benchmark for transactions and are essential for determining the cost of coal within the domestic market.

Auction Prices

Auction Prices are the prices determined through the auction process, where coal is sold to the highest bidder. This can include different types of auctions, such as e-Auctions (conducted online) and Linkage Auctions (for specific coal linkages). Auction Prices reflect the market demand and supply dynamics and can vary based on competitive bidding and other market factors.

Import Prices

Import Prices refer to the prices of coal imported from other countries. These prices are based on the cost of coal including shipping, handling, and other import-related expenses. Import Prices are used to assess the cost of imported coal in the domestic market and can influence overall pricing and availability of coal within a country.

READ ABOUT INDIA’S COAL SECTOR:

https://www.iasgyan.in/daily-current-affairs/coal-industry#:~:text=About%2044%20per%20cent%20coal,2019%20in%20the%20corresponding%20period.

https://www.iasgyan.in/daily-current-affairs/coal-production-in-india

PRACTICE QUESTION

Q. Evaluate the challenges and opportunities in India's coal sector. What is the impact of transitioning to cleaner energy on the coal industry and energy security?

SOURCE: THE HIND BUSINESSLINE