Number of steam coal based power projects in India is likely to go up
The Associated Chambers of Commerce and Industry of India (Assocham) has urged the government to bring down customs duty of 5% on import of steam coal based power plants, said a statement. The statement said this would help power generated out of such projects reach out to masses at affordable rates since power tariff in India are highest amongst in the world.
In a representation, seeking exemption from basic customs duty for steam coal, which is currently applicable at 5% and addressed to Union Minister of Power by Assocham Secretary General, DS Rawat, it has been emphasized that steam coal based power projects in the country would be set up in vast numbers for which various bids for imported steam coal based projects are currently approved and evaluated.
This is according to the National Energy Policy which encourages setting up of such projects to bridge the gap in demand and supply of electricity.
Since, 66% of total power generation in India is coal based technology, their use in future will grow more as coal based power plants would be a major source for generating electricity and India's dependence on steam coal import would continue to grow.
The Planning Commission has also highlighted that the physical gap between the projected demand of 731 million tones and physical domestic availability of 680 million tones of coal works out to 51 million tones in 2011-12 which is immediate need of Indian industry.
This requirement would need to be met from imports in case production from captive blocks does not come as envisaged, the quality of imports would infact be higher. The higher import duty, therefore, would adversely impact competitiveness of Indian industry since import of steam coal attracts basic customs duty at the rate of 5%.
Mr Rawat added that higher cost for imported coal would finally amount to higher tariffs as other than the import duty, electricity is subjected to electricity duty as well against which power generating companies will not be able to claim any input tax credits.
Steam coal is mainly used by power generation companies and cement companies. Both power companies and cement companies are very crucial for development of infrastructure in India and therefore, economic development/growth of India. The levy of basic customs duty on import of steam coal would ultimately result in higher cost of electricity to other industries.
As per the Planning Commission the power tariff for 'paying customers' in India is already among the highest in the world. The levy of basic customs duty only leads to an increased cost of generating power, which will have a cascading effect on all the goods and services, as power sector is the backbone for sustained economic development.
The power sector is a major consumer of coal using 74% of the coal production. Coal based power generation was constrained by shortage in domestic supply of coal and non-materialization of planned imports during April-December 2009. The total consumption of coal by power sector during the period was 271.0 million tones.
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