Exempt coal imports from customs duty, CVD to reduce power...

Exempt coal imports from customs duty, CVD to reduce power tariff: ASSOCHAM

India Infoline News Service / 11:30 , Jan 30, 2012

The imported coal is subject to imposition of 7.55% customs duty for imports from Indonesia and 10.83% for imports from other countries.

Industry body ASSOCHAM sought exemption from basic customs duty and countervailing duty for thermal or steam coal which increase the power tariff by 25 paise per unit and go against the basic tenets of ensuring long-term fuel sustainability and energy security.

Power sector is one of the highest taxed due to non-availability of any input tax credit on excise, countervailing duty, value added tax and service tax, it said. The imported coal is subject to imposition of 7.55% customs duty for imports from Indonesia and 10.83% for imports from other countries.

In addition, there is countervailing duty of 5%. This distorts the field in favour of domestic coal based projects and discourages investments in imported coal based projects, said ASSOCHAM secretary general D.S. Rawat in communication to the finance ministry.

“Higher power tariff tends to have recessionary impact due to cascading effect on all goods and services. Major countries like the United States, Canada, Australia, Japan and Brazil do not levy any customs duty on import of thermal coal.”

Moreover, it becomes obligatory for environment stipulations to import high quality coal for blending with lower grades of indigenous coal. With shortage of energy available to fuel power plants, one of the key challenges is to ensure that power is accessible at affordable costs.

Rawat said business risk profiles of independent power producers resorting to coal imports are adversely affected due to volatility in prices of imported coal, unpredictable long-term pricing arrangements, volatility in shipping rates and exchange rates, logistical and infrastructural constraints for moving imported coal from ports to power stations.

“To bridge the gap in demand and supply, the emphasis is clearly on importing thermal coal or acquiring new mines abroad. It is anticipated that shortage of domestic coal will continue to persist over the medium term as the additional coal generation programme is not likely to catch up with the growing demand led by aggressive capacity addition to align with economic growth targets.”

It is imperative for Indian economy to maintain a steady and accelerated rate of growth amid global recessionary trends for which the power sector has to play its legitimate and designated role, he said.

Thermal generation (coal, lignite and gas) continues to play 65% share of generation capacity with domestic coal supply not sufficient to meet the requirements.

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