The proposal towards waiving off carbon tax is aimed to leave more cash in the hands of coal producers to spend more on procuring equipment that can control pollution caused by coal.
After allowing commercial mining of coal by private companies to boost domestic production, the Narendra Modi-led government is now focusing on making the coal businesses more economical by making it cheaper to produce and use coal. PMO has asked the Ministry of Finance to consider waiving off carbon tax by $6 per tonne, Reuters reported citing an unidentified government official. Earlier, a PMO note had said that waiving off carbon tax, which amounts to Rs 400 per tonne of coal, would leave more cash in the hands of coal producers to spend more on procuring equipment that can control pollution caused by coal.
More than 60 per cent of the power generated in India is still obtained from non-renewable sources, out of which coal has the maximum share. Considering this large scale utilisation, it becomes important to seriously watch the environment sustainability while increasing production.
However, apart from the recently introduced goal of curbing coal imports by ramping up domestic production, the government also has a flagship target of increasing renewable energy capacity to 175 GW by 2022, which may take a hit by the new perk of waiving off the carbon tax. Fitch Solutions earlier said that the centre’s proposed carbon tax waiver on coal may pose substantial downside risks to India’s renewable sector growth.
India’s renewable energy businesses have been operating under price pressures due to lower tariff rate and now the increasing profit margin in the coal sector may further hit the motivation in the green energy sector. Traders also fear that the new incentive may boost the momentum of the coal-powered sector that has already occupied 54 per cent of the country’s overall power sector.
Meanwhile, the cabinet has asked Coal India Limited (CIL) to ramp up production to 1 billion tonnes by 2023-24 for which adequate coal blocks are also being provided. The government earlier said that the move is aimed to curb imports and foster coal availability in the domestic market to boost the ‘Make in India’ scheme.