India Finance News

Making coal cheaper to cut pollution: Here’s how removing this tax will work

Both the coal blocks have been allocated to NMDC based on the diligent efforts of NMDC’s coal division.

Prime Minister Narendra Modi’s office has proposed waiving carbon tax of Rs 400 per tonne on coal for easy installation of pollution-cutting equipment, Reuters reported citing a government document. The current carbon tax on coal amounts to about Rs 0.25 per unit. Removing this would help companies find funds for installing pollution cutting equipment, and meeting emission control targets, the report said. Installing these devices would cost the companies 0.30-0.35 rupees per unit. “Cutting taxes on coal would impact growth of renewable energy as well as the transition away from coal,” Nandikesh Sivalingam, Director at the Center for Research on Energy and Clean Air (CREA) told Reuters.

States have been criticising the government over delayed GST compensation after the new tax structure was brought in 2017. To be sure, coal cess has been increased three times since its inception. In 2010, it was Rs 50 per tonne and went upto Rs 200 per tonne in March 2015 and later Rs 400 per tonne in March 2016. Seven states in India contribute around 97 per cent of total coal produced in the country, and therefore, are also the major contributors of GST Compensation Fund that the centre has created through the imposition of cess on their produce.

Abolishing carbon tax from coal would leave less money with the government in the cesspool. Meanwhile, the sector has been struggling this fiscal as the supply of coal by state-owned Coal India to the power sector witnessed a decline of 8.9 per cent to 291.4 million tonnes in April-November. Coal Minister Pralhad Joshi had recently mentioned that Coal India will produce one billion tonnes of coal by FY2024 as the demand from power sector rises.

Coming back to the abolition on carbon tax which would cost the country 3 per cent of its total indirect tax, the proposed cut would boost the production of coal and make it even cheaper compared with renewable energy sources such as solar and wind. To what extent this proposal, if implemented would impact the growth of renewables and the country’s plan to adopt greener means is yet to be seen.

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Source: Financial Express

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