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National Coal Index shows a Decline in December 2023
Context
National coal Index which reflects the change of price level of coal in a particular month has shown a decline in the month of December 2023.
Understanding the NCI
- Composite Indicator:
- The NCI amalgamates coal prices from various sales channels: Notified Prices, Auction Prices, and Import Prices.
- It encompasses both coking and non-coking coal grades, catering to regulated (power and fertilizer) and non-regulated sectors.
- 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.
- Market Dynamics:
- Established with a base year of FY 2017-18, the NCI serves as a reliable gauge of market fluctuations.
- Its peak, observed in June 2022 at 238.83 points, has since followed a downward trajectory.
Reasons behind the Decline
- Abundant Coal Availability:
- The sharp decline in the NCI indicates sufficient coal availability in the Indian market.
- Robust coal production growth—10.74% in December 2023 compared to the same period last year—ensures a stable supply.
- Coal Auction Premium:
- The premium on coal auctions reflects industry dynamics.
- The decline in auction premium further confirms the ample coal supply.
Implications and Resilience
- Energy Security:
- A stable coal supply bolsters India’s overall energy security.
- Industries reliant on coal benefit from this stability.
- Equitable Market:
- The NCI’s decline harmonizes supply and demand dynamics.
- It fosters a more resilient and sustainable coal industry.
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