Not all coal does the same job. The two broad families are non-coking (thermal) coal, burned mainly to raise steam and generate electricity, and coking coal, whose value lies not in burning but in a special property: when heated in the absence of air, it softens, swells and re-solidifies into coke, a hard, strong, porous carbon. That property is why coking coal is the raw material of steel.
Steel made in a blast furnace needs coke for two reasons at once. Coke is the fuel that reaches the high temperatures required to smelt iron ore, and it is also the chemical reducing agent that strips oxygen from the ore to leave metallic iron. Just as important, coke is strong enough to hold up the burden of ore and flux inside the furnace while still letting hot gases pass through. Only coal with the right caking behaviour and low impurities makes coke good enough for this, which is why "prime" coking coal is a strategic material and commands a premium over thermal coal.
In India, coking coal is graded by ash content into washery grades. The scale runs W-I, W-II, W-III and so on, where W-I is prime coking coal with the lowest ash and the grades below it carry progressively more mineral matter. Ash matters because the non-combustible mineral in coal does not help make iron — it has to be melted and carried off as slag, so the more ash a coking coal contains, the less useful it is to a steelmaker and the lower its grade and price.
Run-of-mine coking coal usually contains too much ash to go straight to a coke oven, so it is beneficiated — washed — first. In a washery the raw coal is separated by density: the lighter, carbon-rich particles float off as clean coal while the heavier, mineral-laden particles sink and are rejected. Washing lowers the ash and lifts the coal into a usable washery grade, which is the step that turns raw seam coal into feedstock fit for steel-making.
Jharia is central to this story. The Jharia Coalfield, developed in the Gondwana Barakar Formation of the Damodar Valley basin, is India's principal source of prime coking coal — the country's most important domestic reserve of the W-I and W-II grades that the steel industry depends on. Coking coal mined here is beneficiated in washeries before it reaches the coke ovens and blast furnaces.
Pricing follows a published system rather than a free-for-all. Pit-head prices for graded coal are set through notified price notifications issued by Coal India and its subsidiaries, so buyers can see the administered price of each grade. Alongside these notified prices, the Ministry of Coal publishes the National Coal Index (NCI) every month — a price index, referenced to a base year, that tracks how coal prices are moving across the market. The NCI carries separate sub-indices, and for a producer of coking coal it is the coking-coal sub-index, not the headline all-coal figure, that reflects the relevant market. Together the notified prices and the monthly NCI give a transparent picture of what coal is worth, grade by grade.
Canonical source: https://coal.gov.in