PMO proposes waiving carbon tax on coal: Report
The move could lower the cost of coal-fired energy by Rs 0.25
The move could lower the cost of coal-fired energy by Rs 0.25
The move could lower the cost of coal-fired energy by Rs 0.25
The move could lower the cost of coal-fired energy by Rs 0.25
Just weeks after Environment Minister Prakash Javadekar announced at the Conference of the Parties (COP26) that India was “walking the talk” on climate change with a $6 carbon tax on coal, Reuters reports that a proposal in the Prime Minister’s Office would waive this tax.
Citing documents “reviewed by Reuters”, the news agency says that the PMO had proposed waiving the approximately Rs 400 tax per tonne that was levied on the production and import of coal.
According to Reuters, the documents claim that the savings from removing the carbon tax would improve the financial health of utilities and distribution companies, besides helping the power producer install “pollution-curbing equipment”.
The tax, first introduced at the rate of Rs 50 per tonne in 2010, has been steadily increased over the years, rising to Rs 400 in 2016. Earlier known as the Clean Energy Cess, this was renamed to the GST Compensation Cess in 2017, changing the ambit of the tax towards compensating states for losses incurred due to the GST.
Coal accounts for 54.2 per cent of India’s electricity generation according to the Ministry of Power. Despite exponential growth, renewable sources of energy including solar, wind, biogas and others account for just 23.1 per cent of electricity generation.
Coal India, the country’s largest state-owned coal producer and a large contributor of revenue to the state exchequer, is currently lagging behind its production targets for FY20.
In the April-November period, India’s coal imports increased by 4.4 per cent to 161.43 million tonnes. The government had a target to limit imports to 235 MT this financial year. The country produced 730.35 MT of coal in FY'19, while the imports were 235.24 MT.
The move to remove the tax may signal the government’s willingness to incentivise Coal India to meet its stated target of 660 million tonnes in FY20. In addition, the waiver could reduce the price per unit of energy sourced from coal. Reuters calculated that this could take the price of coal-fired power down by Rs 0.25 (it is currently at around Rs 3.5).
With renewable energy selling at between Rs 2.5 to Rs 2, this would make coal-fired power more competitive in a market where solar power has been cheaper than coal-fired energy for a while.
In a written reply delivered in the Lok Sabha on December 4, Coal Minister Pralhad Joshi said that the government had collected Rs 2.03 lakh crore ($28.56 billion) in revenue from Coal India over the last six years “beginning from financial year 2013-14 up to the last fiscal 2018-19”.