What is National Coal Index?

• The coal ministry has decided that the first revision in Performance Bank Guarantee (PBG) would be done upon grant of mine opening permission for respective coal mines.

• As per the provisions of the tender document, PBG to be submitted for each successfully auctioned coal mine is to be revised annually based on the National Coal Index (NCI) for the month of April in the beginning of the year.

• Since NCI has doubled since the launch of first commercial coal mine auctions in 2020, several representations were received from the industry for relaxation in PBG revision provisions.

• It was requested that unprecedented increase in NCI has led to significant financial burden on successful bidders, whose mines are in the pre-operationalisation stage, impacting fund availability for mine operationalisation activities.

• The move is expected to reduce financial burden on the bidders during the process of operationalisation of coal mines and is likely to increase participation from the bidders in the sale of commercial coal blocks.

• In lieu of the same and to effectuate this amendment in the ongoing round of auction, the coal ministry has extended the auction bid due date to January 30 from the earlier January 13.

• The government launched the sixth round of commercial coal mines auction in November and has put on block 141 mines.

National Coal Index

• The ministry of coal has started commercial auction of coal mines on a  revenue share basis. In order to arrive at the revenue share based on market prices of coal, one National Coal Index (NCI) is conceptualised.

• The NCI 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 FY 2017-18.

• NCI is a price index combining the prices of coal from all the sales channels — notified prices, auction prices and import prices. 

• The amount of revenue share per tonne of coal produced from auctioned blocks would be arrived at using the NCI by means of a defined formula.

• The Index is meant to encompass all transactions of raw coal in the Indian market. This includes coking and non-coking of various grades transacted in the regulated (power and fertilizer) and non-regulated sectors. Washed coal and coal products are not included.

• NCI has been rolled out on June 4, 2020 and the aim is to have an Index that will truly reflect the market price. 

• 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.

• The concept and design of the Index as well as the Representative Prices have been developed by the Indian Statistical Institute, Kolkata.

• The National Coal Index is released every month.

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