India likely to raise coal tax issue with Australia and Indonesia

Monday, 14 Nov 2011

Live Mint reported that India may raise with Australia and Indonesia the issue of policy changes that has made coal imports expensive for Indian companies that own mines in the two countries.

Indian coal minister Mr Sriprakash Jaiswal said that “We shall try to initiate talks with Australia and Indonesia. The Indian government will most certainly take up this issue. We have also raised it and will request MEA also to take it up. But we need to know with some authority that this has been done for sure. We need an authentic letter and then we will tell the MEA that due to this there will be a big impact on coal imports so kindly look into it and ask for some relaxation so that imports are not impacted.”

These interventions will affect the financial viability of imported coal based power projects such as TATA Power Ltd’s Mundra project and Reliance Power Ltd’s Krishnapatnam project both of 4,000MW each because their fuel costs are set to overshoot expectations.

Rising demand at home prompted Indian and Chinese companies to invest in the coal sector in Australia and Indonesia, causing prices of thermal and metallurgical coal to rise and leading governments there to seek a greater share of revenue. While Indonesia has implemented price benchmarking to capture higher royalty and income taxes, which are pegged to the price of coal, Australia has imposed a Minerals Resource Rent Tax a tax on profits generated from the exploitation of non renewable resources, levied on 30% of so called super profits accruing from the mining of iron ore and coal in Australia.

(Sourced from Livemint.com)