National Coal Index

• 12 Feb 2021

Why in News

Recently, the Ministry of Coal has started commercial auction of coal mines on a revenue share basis using the National Coal Index (NCI).

• NCI was rolled out in June 2020.

Key Points

• 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.

Coal

• Coal is the most abundant fossil fuel which holds 55% of India's energy need.
• Based on the uses, coal is divided into two types:
  
  • Coking Coal:
    
    • This type of coal when subjected to high temperature carbonisation i.e. heating in the absence of air to a temperature above 600 degree Celsius, forms a solid porous residue called coke.
      
      • Coke is fed into a blast furnace along with iron ore and limestone to produce steel in steel plants.
    • Coking coal is desired to be of low ash percentage.
    • Use:
      
      • Mainly used in steel making and metallurgical industries.
      • Also used for hard coke manufacturing.
  • Non Coking Coal:
    
    • These are coals without coking properties.
    • Use:
      
      • This is the coal used in thermal power plants to generate electricity, so it is also known as steam coal or thermal coal.
      • Also used for cement, fertilizer, glass, ceramic, paper, chemical and brick manufacturing, and for other heating purposes.
• Coal is also classified into four ranks: anthracite, bituminous, subbituminous, and lignite. The ranking depends on the types and amounts of carbon the coal contains and on the amount of heat energy the coal can produce.

Source:PIB