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16th February 2024 (9 Topics)

National Coal Index shows a Decline in December 2023


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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