An Orderly Transition from coal to renewables

• With inflation at unprecedented levels in many countries, concerns over energy security have gained centre stage.

National Coal Index (NCI):

• Objective: to provide a benchmark for revenue-sharing contracts being executed after the auctions for commercial mining of coal.
• Need for the Index: Wholesale price index (WPI) for coal has no component of imported coal.
• For the last six months, the WPI for Coal has been stable at around 131. Over the same period, the NCI has jumped from about 165 to about 238 reflecting the sharp increase in international coal prices.
• Significance: Resulted in an increase of over 30 per cent in coal production from April to June this year.
• This has helped reduce inflationary pressures in the economy.

Measures need to be taken:

• Financial community has to be sensitised to the need of increasing domestic coal production to meet the growing energy demand
• Finalize draft National Electricity Policy released in May 2021.
• Adopting a more holistic approach toward environmental, social, and governance (ESG) criteria.
• Need for a regulator to address the issues arising from a greater role of the private sector
• Increasing domestic production of coal and diversifying the production base complemented with efforts to improve the quality of the coal produced
• Subsidy regime needs to be reformed

Prelims Takeaway:

• National Coal Index