The Budget may have made everything else expensive, but power consumers will not have much to complain. This is so because imported-coal power generation will become cheaper by about 8-10 paise a unit due to waiver of five per cent customs duty on coal. Since, fuel cost is a pass-through in most of the operating power projects, consumers can expect to reap benefits, provided global coal prices do not rise further.
The customs duty waiver would also give a push to coal imports as it would prevent a cascading impact of the tax on imported fuels. “This will have an impact of about seven to eight paise per unit in power tariffs, if the plant is based on 100 per cent imported coal,” Ernst & Young Analyst Kuljit Singh, said. The benefit though is available only till 2014, after which the government will review the duty exemption.
Besides, the country’s largest power producer, NTPC, does not expect any change in power tariffs as only two per cent of customs duty is levied on import of coal from Asian countries and NTPC mainly imports coal from these countries, said a company executive. However, the benefit of concessional countervailing duty (CVD) of one per cent to steam coal would benefit it too. Along with CVD, coal imports from Indonesia earlier attracted 7.55 per cent duty, while those from other countries carried 10.83 per cent duty.
The domestic availability of coal has been a major hindrance for the power generation companies, which had to import coal to bridge the shortfall. Last year, power sector imported about 45 million tonnes coal. A recent directive by the Prime Minister Office has asked Coal India to meet the requirements of the power industry even through imports.
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