Doubling clean cess on coal to raise power bills

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Published: March 1, 2015 3:28:29 AM

Finance minister Arun Jaitley’s proposal to double the clean-energy cess on coal could lead to increase...

Finance minister Arun Jaitley’s proposal to double the clean-energy cess on coal could lead to increase in power tariff for consumers with state-run behemoth Coal India itself anticipating a cost escalation of R5,000 crore.

The cess is presently levied on coal, peat and lignite to finance and promote clean energy initiatives and fund research in this area. “In indirect taxes, I propose to increase the clean-energy cess from R100 to R200 per metric tonne of coal, etc to finance clean environment initiatives,” Jaitley said while presenting the Budget 2015-16.

Sources said the impact from the move could be roughly R5,000 crore which would be passed on to power consumers, who may have to pay about 4 paise extra per unit.

From the increase in cess it is likely that the cost of generation would go up by 5-6 paise per unit, NTPC said. JSPL’s Managing Director and CEO Ravi Uppal said it would increase the cost of energy. “It will make a difference of 10-12 paise per unit of power,” said Uppal.

In the last budget, government increased the cess to R100 from R50 per tonne. Debasish Mishra, senior director, Deloitte, said the result would be an increase of 6 to 7 paise per unit of power, which he said was not significant.

The country began imposing clean-energy cess on raw coal and lignite in 2010. “This is a step in right direction and along with the target to achieve 175 GW of renewable energy capacity by 2022, it demonstrates India’s commitment to tackle climate change,” he said.

Kameswara Rao, leader energy (utilities and mining), PwC India, said the increase in clean-energy cess and service tax will increase cost of coal by 4 to 6 paise per kwh and comes on top of increase in rail freight earlier this week. “This has been a recurring feature and should spur investments in coal washeries and in renovation of old power plants,” said Rao.

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