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National Coal Index

  • 12 Feb 2021
  • 3 min read

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.
  • 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

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