National Coal Index goes down 3.48% as coal availability improves in India’s market

New Delhi: The National Coal Index (NCI) has shown a significant decline of 3.48 percent in June 2024, registering at 142.13 points compared to 147.25 points in June 2023. This decline is seen as an indicator of sufficient coal availability in the market to meet growing demands. “This notable decrease in the NCI reflects an abundant supply of coal, ensuring stability in the market,” stated the Ministry of Coal on Friday.

The National Coal Index is a comprehensive price index that consolidates coal prices from various sales channels, including Notified Prices, Auction Prices, and Import Prices. It takes into account the prices of both coking and non-coking coal across different grades, transacted in both regulated sectors (like power and fertilizer) and non-regulated sectors. Established with the base year as FY 2017-18, the NCI serves as a reliable barometer of market dynamics, offering valuable insights into price fluctuations and trends within the coal industry.

Decline in Coal Auction Premium Reflects Market Stability

In addition to the overall decline in the NCI, a sharp drop in the premium on coal auctions further underscores the market's stability. The auction premium is a crucial metric that reflects the industry's current state, and its decrease is a clear sign of sufficient coal availability. “The impressive growth of 14.58 percent in the country’s coal production during June 2024, compared to the corresponding period last year, ensures a stable supply to various coal-dependent sectors, significantly contributing to the overall energy security of the nation,” the Ministry of Coal highlighted.

This growth in coal production is pivotal in meeting the country's escalating energy demands. With coal being the backbone of India's energy sector, the increase in production not only ensures a steady supply but also helps in stabilizing prices and reducing the pressure on imports.

The Ministry of Coal also emphasized the broader implications of the declining NCI. “The downward trajectory of the NCI signifies a more equitable market, harmonizing supply and demand dynamics. With sufficient coal availability, the nation is well-positioned to address burgeoning demands while also laying the foundation for long-term energy security. This trend fortifies a more resilient and sustainable coal industry, fostering a prosperous future for the nation,” the ministry stated.

Impact on the Power Sector and Economy

The stable supply of coal, as indicated by the NCI and auction premiums, is particularly beneficial for the power sector, which relies heavily on coal for electricity generation. With nearly 70 percent of India's electricity generated from coal, the assurance of sufficient supply at stable prices is crucial for preventing power shortages and ensuring uninterrupted electricity supply across the country.

Furthermore, the ample availability of coal at competitive prices is expected to have a positive impact on the broader economy. Industries such as steel, cement, and chemicals, which are heavily reliant on coal, are likely to benefit from reduced input costs, thereby enhancing their competitiveness both domestically and internationally.

The Ministry's statement also suggests that the current trends could lead to increased investment in the coal sector, with both public and private players expanding their operations to capitalize on the favorable market conditions. This, in turn, could create more jobs and contribute to the overall economic growth of the country.