Kolkata: The coal trading community has at last got a benchmark for domestic coal market prices with the launch of Mjunction Services' Coal Spot Price Index.

Coal prices are known to show volatile trends with 550 varieties being traded in the country. The new index will now provide a reference point for gauging price-movement trends.

The index will also enable coal consumers to mitigate the risk of market price volatility.
Four other indices have also been developed -- MJcomposite, MJsteel, MJcement and MJpower.

MJcomposite will cover the top 60 varieties of coal traded through the spot e-auction. These 60 varieties represent 70% of the domestic coal sold through e-auction. MJsteel wil cover grade B coal with a gross calorific value (GCV) of 5,800-6400 Kcal/kg and would be relevant for the steel, sponge iron and paper industries.

MJcement will showcase the performance of Grade C coal with a GCV of 5,400-5,800 Kcal/kg. It will be a useful tool for the coal and cement industries. MJpower will cover Grade E and F coal with a GCV of 3,600-4,800 Kcal/kg.

Of the total quantity of coal sold through e-auction, around 52% comprises grades E and F. This index will be relevant for the power sector and captive power plants.

So far, coal consumers in India had depended on global coal indices which were based on price assessments, called polling, whereas this index is the only one based on actual transactional (e-auction) data and will be refreshed at 10am daily.

It will also be the reference price point for coal consumers to enter into long-term contracts in secondary coal trade.

A K Sarkar, director, marketing, Coal India, said in Kolkata on Wednesday that the coal index has arisen out of price volatility. "For any well-functioning market, information on price is very important. A market cannot function on information asymmetry," he said. He also added that the information has been culled from the past three years' e-auction data.

Of the total coal produced by coal companies, 10% is traded through e-auction. Of this 10%, around 50% is traded on mjunction.

Sarkar said of the 435 million tonne (mt) production plan of Coal India (CIL) for 2009-10, around 22 mt will be traded on mjunction. Last fiscal, of its 403 mt output, 40 mt was sold through e-auction (of this, around 20-22 mt was sold through mjunction) and around 313 mt were sold to power companies through fuel supply agreements and the rest to other sectors.

Viresh Oberoi, managing director, Mjunction Services, said there was no plan as yet to monetise opportunities from the index.

"We are not looking at the coal futures market through this venture. This index will help in getting secondary contracts and collating the benchmark data, which is supplied by CIL," Oberoi said.