NEW DELHI: An inter-ministerial panel of officials tasked with charting a course for stopping
coal imports
by 2030 has recommended raising
carbon tax
on superior imported fuel and reducing the same on lower quality domestic produce.
Govt currently charges a flat Rs 400 per tonne GST compensation
cess
for both imported and domestic coal. The panel, set up by the
coal ministry
, has suggested linking the cess to the ‘heating quality’ to level the field for consumers of both imported and domestic coal and discourage imports.
Under the current system, users of domestic coal with high ash content and lower heating value of 3,000-3,500 kcal (kilo calories) bear a higher cess burden per unit of heating as they have to burn double the quantity of fuel compared to consumers using imported fuel with low ash content and higher heating value of 5,000-6,000 kcal.
The current system ends up raising power tariffs as majority of generation companies burn domestic coal. Other users such as sponge iron producers prefer superior imported coal. According to the panel, every Rs 100 per tonne increase in coal price pushes up power tariff by six paise per unit. In other words, the current cess has an impact of 24 paise per unit.
The GST compensation cess collection from imported coal stood at Rs 8,359 crore on a total import value of Rs 22,8742 crore. This works out to 3.6% cess. In contrast, cess collected from domestic coal stood at Rs 29,096 crore on a value of Rs 11,7251 crore, translating into 25% cess.
The panel recommended charging rationalised GST compensation cess on ad-valorem basis, where it will be levied as a percentage of the price and linked to quality, instead as fixed amount.
India’s import of thermal coal increased 10% in 2023 to 176 million tonnes in spite of record domestic production.
