The Ministry of Coal (MoC) has developed a National Lignite Index (NLI) for facilitating auction of lignite mines on revenue sharing basis.
Lignite, generally yellow to dark brown in colour, is regarded as brown coal. It is characterised by low fixed carbon percentage and calorific value, and primarily used for electricity generation.
The concept and design of NLI has been kept similar to the National Coal Index. Moreover, its application would be identical to the coal block auctions, i.e., to determine the quantum of revenue share from an auctioned lignite mine.
This provision will also help in tracking price movements of lignite in the Indian market as it lacks a proper mechanism.
At present, there are 20 lignite mines being operated by eight companies from government and private sector. However, there is no standardised grade and price channel for sale which leads to discrimination.
How will NLI work?
For NLI computation, the MoC has grouped the various grades of lignite into two sub-indices: one for G11 to G14 and other for G15 to G17 and below grades.
The process involves collection of volume and sales value for the different grades from captive mode and commercial transactions via auctions.
For each price channel, the monthly unit of transaction will be determined by dividing aggregate sales value with aggregate sales volume. The sub-indices for a particular month would be unit transaction for that month relative to the base month. The base year for index has been taken as 2021-22.
Thereafter, NLI and grade-wise base price would be compiled and published every month based on following methodology:
(a) NLI: Calculated as weighted average of grade specific indices. Value share of grades in the reference period would be used as weighs.
(b) Base price: Calculated as weighted average of monthly unit values in captive and commercial channels. Volume shares of the modes in the reference period would be used as weighs.
Upcoming auction
The MoC has offered a total of 109 blocks for sale in the fifth tranche of commercial mining auctions. These include 100 coal blocks and 9 lignite blocks.
List of Lignite blocks
Quantity in mnt
Notably, this is the first-time lignite blocks have been introduced in these auctions.
The auction for coal blocks has already commenced with technical bid opening held on 28 June, 2022. On the other hand, the time-line for lignite block auction has been revised twice.
As per latest schedule, the due date for technical bid submission for lignite blocks has been extended to 3 August, 2022, while the financial bidding round will commence from 30 August, 2022.
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