Teri proposes cess on coal production

With coal bearing states demanding compensation for negative externalities arising out of coal mining, The Energy Resources Institute (Teri) has recommended a cess at the rate of Rs 119 per tonne of coal produced.

The cess has been proposed by Teri keeping in view the environmental and social impact of coal mining.

The suggestion has been made by Teri in its preliminary report on “Equitable sharing of benefits arising from coal mining and power generation from resource rich states”. Teri had carried out the study in coal bearing states like Odisha, Jharkhand, Madhya Pradesh and Chhattisgarh at the insistence of the Planning Commission. While Odisha had demanded free power of up to 25 per cent from thermal plants and 33 per cent from projects based on coal washery rejects, other states either pitched for free power or compensation due to pollution load from coal mining and power generation.

“Based on our estimates of externalities for coal mining, uncompensated externalities amount to Rs 119 a tonne. So, cess can be Rs 119 per tonne of coal produced. Such a cess should be levied by the Central government and collected by the coal producing state,” Teri stated in its report.

The proceeds of the cess are to be credited into a Coal Environment and Social Impact Mitigation Fund. The amount collected in this fund would go back to the coal bearing states for addressing the externalities.

Teri has also suggested an environment and social cess on coal based power generation factoring in the effects like ash disposal, health damages and displacement. The cess is to be levied at the rate of 75 paisa per unit of electricity generated from a coal based power plant all over the country. The value of the cess would cover uncompensated environmental and social costs not included in coal mining, fly ash disposal, air and water pollution, coal transport and carbon emissions.

This cess would also be levied by the Central government and collected by the state in which the thermal power plant is situated. The proceeds of the cess are to be credited into a Thermal Power Plant Environment and Social Impact Mitigation Fund.

“The coal rich states are poorer than most states and also many of the districts where the coal is located are particularly poor and without access to basic amenities and services. The people impacted most by coal mining and power generation are also those living in these districts. A cess that is imposed, collected and utilised to address these inequities will result in a greater fairness across states and their people,” the Teri report stated.