Indian government may make coal imports cheaper for power companies

Monday, 23 Jan 2012

Business Standard reported that the Indian government may ease import of coal to tide over the requirement for power generation companies and other infrastructure utilities.

Official sources said while Customs duty may not be completely rolled back, a partial rollback of the countervailing duty on imports done for power infrastructure projects is being considered by the finance ministry.

They added the consideration is for relaxing the five per cent CVD, if the import was specifically meant for thermal power generation or coal based power plants and related infrastructure projects. At present, there is a five per cent Customs duty on non coking coal, besides one per cent excise duty, announced on 130 items in the last Budget. This was done when the government proposed a levy of one per cent excise duty on 130 items without Cenvat credit.

If Cenvat credit is taken, then these goods will attract a tariff of 5%. This applies to all categories of coal imports lignite, peat, coke, tar, etc. They explained that CVD was imposed to provide a level field for domestic manufacturers and charged at a rate equal to the excise duty.

Cenvat credit means the credit availed by a goods manufacturer in the form of a deduction of input tax paid on the purchase of raw materials, fixed assets, packing material, etc, from the total tax payable to the government.

CVD is also called anti-subsidy duty. Besides industry representation, the power ministry has also suggested to the finance ministry for a relook into the coal import duty structure. It feels while global coal prices have gone up 35 to 40% additional import duty is adding to the cost.

(Sourced from BS)