The Centre is proposing to levy a cess on electricity to compensate coal-bearing states for the social and ecological damage suffered. The Planning Commission has initiated a consultative process to introduce the tax.
Deputy adviser (energy), Planning Commission?s power & energy division, Harendra Kumar, has written a letter to the power secretaries of Orissa, Jharkhand, West Bengal, Chhattisgarh and Madhya Pradesh seeking the states? suggestions on the proposal.
While tax can be levied on power consumption, there is no provision in the Constitution for taxing its generation. ??Since some states put up this demand (to tax power generation), we have asked Teri to study the matter in the interest of Centre-state relations,?? a senior functionary in the Plan panel said.
The Planning Commission, in fact, had conducted a study, ?Equitable sharing of benefits arising from coal mining and power generations among resource-rich states?, which was carried out by The Energy & Resources Institute (Teri). Citing reference to the Teri report, copies of which are available with FE, the commission has elicited the opinion of the states.
The coal-bearing states are demanding 12% free power from Independent Power Producers (IPPs) in line with the national hydro power policy. The IPPs are using the state?s coal, water and land, and causing huge damage to the ecology. Due to coal mining and plant establishment, large-scale displacement takes place. On the other hand, the state does not benefit from the power plants as the power generated is exported to other states. Therefore, the states are demanding that IPPs need to compensate for the damage.
Orissa chief minister Naveen Patnaik has written several letters to the prime minister and the union power minister demanding that the states be allowed to avail 12% free power from the IPPs, as is the case with multi-state hydro power plants. The Orissa government, in fact, has signed MoUs with as many as 29 IPPs on the condition that these would share 12% of their generation with the state free of cost.
Hinting that the bilateral arrangements are illegal, the Teri report says, ?Any policy that mandates free power from only those plants that are selling/exporting power to other states can be challenged in the court of law as imposing restrictions on freedom of trade, commerce or intercourse among states.?
Teri, on the other hand, has suggested, ?The most attractive legal route is to have a union imposed, but state-collected cess associated with the damage cost of impact of coal mining as per unit electricity.? It has recommended: ?A single cess linked to environmental and social impact of coal-based generation levied by the Centre on electricity generation across the country and process of the cess used to compensate the states for impact of coal mining and power generation based on defined criteria.?
?We have asked various government departments like forests and environment, irrigation and revenue to give their inputs?, said the state energy minister, Arun Kumar Sahu. He said the state government?s opinion would be formed on the basis of the inputs from the various stakeholders.