Steel, cement, power and coal companies will have to shell out more on mining as the government proposes a five-fold increase in stowing excise duty (SED) on coal which is used for rehabilitation, stowing and infrastructure development of abandoned mines.
The rate of SED will rise by up to R50 per tonne depending on the grade of coal from R10 per tonne at present. This will increase domestic coal prices and impact all coal consumers already facing problems due to volatile prices and supply shortage.
Stowing tax is charged on total raw coal dispatched from mines. As per current norms, under Coal Mines (Conservation & Development) Act. (CCDA) 1974, coal miners have to pay a stowing excise duty of R10 per tonne to Coal Controller Organisation. The collected fund is then used for properly carrying out the mine closure plan. The Centre reimburses a part of this duty to coal companies if a portion of the fund is not invested.
The government collects around R512 per year as stowing levy. The coal ministry official said that the government has been trying to increase the stowing duty for a long time. A decision in this regard was expected in the Cabinet meeting on Thursday, however, was postponed at the last minute.
? The need to hike the duty was felt for some time because more funds are required to fill up the undermined areas. A Cabinet decision on this is likely next week,? he said.
The coal industry experts said, any increase in such duty will impact the sentiments of miners and may have little impact on coal pricing. ?The coal sector is going through rough times these days. A hike in SED would have adverse impact on miners. The impact on pricing would be known only when there is a clarity on exact hike,? Kalpana Jain, senior director, Deloitte said.
The coal requirement in the country is going to go up. During 12 th five year plan, it is expected to be at 980.50 million tonne. Of this, the domestic production is likely to be at 683 mt.