The 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 (CVD) 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 five per cent. 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 35-40 per cent, additional import duty is adding to the cost.
Key coal exporting countries like Indonesia and Australia have changed their pricing in recent months, pushing the international prices substantially. Since the increase in fuel cost cannot be passed on to buyers under the existing power purchase agreements, many of these coal projects have become commercially unviable. Moreover, there is a shortfall of availability in the domestic market. According to the Annual Plan Document 2011-12, the demand for coal in the country is likely to be 696.03 million tonnes (mt) and the projected domestic coal production is 554 mt. The gap will have to be met through imports.