Performance Bank Guarantee Coal Mines
Source : PIB
GS III : Indian Economy
What is discussed under Performance Bank Guarantee Coal Mines?
- What is Performance Bank Guarantee (PBG)?
- National Coal Index (NCI)
Why in News ?
The Ministry of Coal had launched the 6th round and 2nd attempt of 5th round of commercial coal mines auction on November 03, 2022 for 141 coal mines.
- To promote Ease of Doing Business (EoDB), the Ministry has decided that going forward the first revision in the Performance Bank Guarantee (PBG).
Key Facts
- As per the provisions of the tender document, the Performance Bank Guarantee (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.
- NCI has become double since the launch of first commercial coal mine auctions in 2020, several representations were received from the industry for relaxation in PBG revision provisions.
- Increase in NCI has led to significant financial burden on successful bidders, whose mines are in the pre-operationalization stage, impacting fund availability for mine operationalization activities.
India’s Coal Mining
- The most readily available fossil fuel in India is coal.
- It meets a sizable portion of the country’s energy requirements.
- It is used to generate electricity, provide energy to industries, and meet home demands.
- India relies heavily on coal to meet its needs for commercial energy.
- Coal India, the world’s largest coal producer, is the only non-Chinese state owned entity to rank in the Top 10.
What is Performance Bank Guarantee (PBG)?
- When there is a delay in providing the performance or operation, the bank will compensate you financially under a performance
Image by Nattanan Kanchanaprat from Pixabay guarantee.
- Even if the service is poorly provided, payment must be made.
- It states If the seller fails to supply the customer with services or commodities in accordance with the specifications established in the contract, a performance guarantee takes effect.
What is Bank Guarantee?
- This is a promise by the bank in which a beneficiary that it will pay the fund in the event that the real customer is unable to fulfil his or her commitments.
- The bank will make the payment on the client’s behalf if the client asks a bank guarantee.
National Coal Index (NCI)
- NCI is a price index which reflects the change of price level of coal on a particular month relative to the fixed base year.
- The base year for the NCI is FY 2017-18 and rolled out in 2020.
- It is developed by the Indian Statistical Institute, Kolkata.
- 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 defined formula.
- 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.
- Indes include 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.
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