Karandikars & Associates

National Coal Index

(Source:Ministy of Coal)

1. Ministry of coal allocates coal blocks through auction to private companies and also to Public Sector Undertakings through allotment. From the year 2015, after the cancellation of 204 coal blocks allotted between 1993 and 2011 by the supreme court, various rounds of auctions have taken place. The auction of blocks is done through electronic bidding under fixed bid system
2. Government in the month of December 2017, decided to form a high power expert committee consisting of experts from various fields like banking, coal, telecom etc to examine the then current system of bidding and suggest measures to improve it
3. One of the major recommendations of the committee was to develop a NATIONAL COAL INDEX for the country that will reflect the movement of the price of coal in the domestic coal market. This Index will be used to determine the variation in the PREMIUM either in the form of Rs/ton of coal produced by the Operators or in Percentage share of revenue of operators. The aim is to have an index that will truly reflect the market price
4. In May 2018, Ministry of Coal (MoC), requested the assistance of the Indian Statistical Institute (ISI) in developing a NATIONAL COAL INDEX for the country that will reflect the movement of the price of coal in the domestic coal market
5. The concept and design of the National Coal Index (NCI) and Representative Prices (RP) have been developed by the Indian Statistical Institute, Kolkata
6. NCI is a price index combining the prices of coal from all the sales channels- Notified Prices, Auction Prices and Import Prices
7. The Majority of coal is sold through the Notified Prices. For Non-Coking Coal, CIL fixes notified prices for each grade. There is price differentiation between the Regulated Sector and Non- Regulated Sector (NRS). Further, due to cost considerations, different Notified Price dispensation has been made for WCL coal. Similarly, SCCL also notifies prices for different grades of coal- with price differentiation between Regulated and Non- Regulated Sectors
8. In respect of Coking Coal, only certain Subsidiaries of CIL are producing the grade. The power of notifying the prices of Coking Coal has been delegated to the Subsidiaries
9. The Notified Prices of each grade of coal for Regulated and NRS and for CIL (Except WCL), WCL and SCCL for Non-Coking Coal and Notified Prices for Coking Coal of different Subsidiaries of different grades-for Regulated Sector as well as NRS is taken for the purpose of NCI as well as the RP
10. Apart from sales at Notified Prices, CIL and SCCL undertake e-Auction of Coal on different platforms- MSTC and Junction. For this purpose, a set of schemes exist for a particular type of customer. The auction is conducted each month. Also, CIL undertakes Linkage Auction for NRS
11. For the purpose of NCI and RP, the Unit Value of Coal of different Grades from auction (of CIL only) is taken into account. The auction, for this purpose, means both e-auction and Linkage Auction
12. The third component of the NCI and RP is the Import Prices. For compilation of both, only imports of specific types of coal from specified countries are taken into consideration. For each month, the quantity of import and its value is collected from DGCIS and from these two values, Unit Value of Coal is computed for its use in NCI as well as RP

Weights of Price Channels for NCI

1. The weights of the National Coal Index have been arrived at each Sub-Sector level. The sub-sectors and weights of different price channels are summarized in Table below
2. As can be seen, there are three subsectors in Non-Coking Coal category and two subsectors in Coking-Coal category
3. For each of these subsectors, relative weights of the three price channels, namely Notified Price, Auction Price and Import Price are different, but they all add up to 100%



4. The weight of the Notified Price Channel is further divided into a set of CIL, WCL and SCCL Notified Prices of different grades of coal and for different sectors
5. The Sub-Sector Indices are averaged to give Indices for Non Coking Coal and Coking Coal. The weights for consolidation are as captured below
6. Individually, Non-Coking Top Grade has a weight of 24.55, Non-Coking Medium Grade has a weight of 74.82 and Non-Coking Low Grade has a weight of 0.63, which together add up to 100, and give Non-Coking Coal Index
7. Likewise, Coking Top Grade has a weight of 79.94 and Coking Bottom Grade has a weight of 20.06, which together add up to 100 and give Coking-Coal Index
8. Finally, Non-Coking Coal Index has a weight of 74.23 and Coking Coal Index has a weight of 25.77, which together add up to 100, and give National Coal Index

Monthly NCI