India Govt should exempt levy over coal for affordable power

Mon, Jan30, 2012

NEW DELHI (Commodity Online): To ensure the accessibility of power at affordable costs, the industry body the Associated Chambers of Commerce and Industry of India (ASSOCHAM) wants the India Government to exempt thermal or steam Coal from basic customs duty and countervailing duty.

The customs duty and countervailing duty for thermal or steam coal which increase the power tariff by 25 paise per unit and go against the basic tenets of ensuring long-term fuel sustainability and energy security.

Power sector is one of the highest taxed due to non-availability of any input tax credit on excise, countervailing duty, value added tax and service tax and the imported coal is subject to imposition of 7.55% customs duty for imports from Indonesia and 10.83% for imports from other countries.

According to DS. Rawat, Secretary General, ASSOCHAM, higher power tariff tends to have recessionary impact due to cascading effect on all goods and services. Major countries like the United States, Canada, Australia, Japan and Brazil do not levy any customs duty on import of thermal coal.

In addition, there is countervailing duty of five per cent. This distorts the field in favour of domestic Coal based projects and discourages investments in imported coal based projects.

Also the independent power producers resorting to coal imports are adversely affected by the volatility in prices of imported coal, unpredictable long-term pricing arrangements, volatility in shipping rates and exchange rates, logistical and infrastructural constraints for moving imported coal from ports to power stations.

“To bridge the gap in demand and supply, the emphasis is clearly on importing thermal coal or acquiring new mines abroad. It is anticipated that shortage of domestic coal will continue to persist over the medium term as the additional coal generation programme is not likely to catch up with the growing demand led by aggressive capacity addition to align with economic growth targets.”said Rawat.

Thermal generation (coal, lignite and gas) continues to play 65% share of generation capacity with domestic coal supply not sufficient to meet the requirements.

(sourced Commodity Online.com)