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An orderly transition from coal to renewables: The National Coal Index
Context
Since the onset of the pandemic and after the Ukraine-Russia war, commodity prices, especially that of energy, have surged worldwide.
- With inflation at unprecedented levels in many countries, concerns over energy security have gained centre stage.
About
- Recently, there have been several policy initiatives in the coal sector in
- One which has gone largely unnoticed is the introduction of the National coal index (NCI).
- This index was created to provide a benchmark for revenue-sharing contracts being executed after the auctions for commercial mining of coal.
- This development shows the importance of increasing domestic coal production to reduce the exposure of the domestic economy to the price volatility of international markets.
- Anticipating these problems, a big effort toward permitting commercial mining has been made to get the private sector to produce more coal.
- After taking preparatory action, about 50 contracts have been finalised in the last two years.
- Several other steps have been taken to increase domestic coal production.
National Coal Index (NCI)
- About: It is a price index which reflects the change of price level of coal in a particular month relative to the fixed base year.
- The base year for the NCI is Financial Year 2017-18.
- Compilation:
- 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.
- Sub-Indices: 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.
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Coal Sector Reforms in India Unlocking coal mining for private players is a step forward to attain self-reliance in the coal sector. However, for sustainable utilization of coal, there is a need to look into these reforms from a multidimensional viewpoint. Announced Reforms in Coal Sector
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