 "FinMin opposes cut in duty on coal for power generation")
According to officials close to the development, following the suggestion of the power ministry, the finance ministry in the budget, reduced the import duty on steam as well as bituminous variety of coal. The officials added that the proposal only suggested reduction of import duty on steam coal which is imported and used for power generation.
“We observed a large part of power generation uses bituminous (high calorific variety). The ministry therefore decided to bring a parity and imposed a duty of four per cent across varieties. Earlier, steam coal used to have zero basic custom duty (BCD) and one per cent countervailing duty (CVD). Import of bituminous coal, on the other hand, attracted a BCD of five per cent and CVD of six per cent, total 11 per cent duty. Now both carry four per cent duty – two per cent each for BCD and CVD”, explained an official.
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They added that the decision to bring parity in duty was taken at the cost of losing around Rs 2,000 crore a year on an average import of coal worth Rs 40,000 crore for power generation.
“This is at a time when are running short of measures for excess revenue mobilization to bridge the current account deficit”, they said.
"Last year, the international price of coal was ruling very high around $120-125 per tonne whereas now it has come down to $85-90. Therefore as per our calculation, the effect of the import duty coupled with decrease in international prices is around 5.6 paise per unit which is far less than what it was last year," the officials claimed.
Therefore there is no further reason to tinker with the import duty on any variety of coal as of now, officials said.
As per the power ministry that sought reduction in import duty from 4% at present to 1% to help power plants using imported coal, the price of imported is almost twice that of domestic coal produced. But many upcoming plants are forced to use imported coal due to the shortage in domestic availability. In reality, the ministry is upset about rise in import duty of steam coal which has gone up from one per cent to four per cent in the process of bringing in a uniform duty structure across coal varieties.
The proposed changes could provide relief to power projects of over 60,000 Mw that are commissioned or are likely to be commissioned over next couple of years, but are still awaiting coal linkage, reportedly.