Govt levies cess on coal; prices likely to go up

The government today proposed a coal cess of Rs 50 to create a fund for promoting clean energy, a move which may push up fossil fuel prices.

"To build the corpus of the National Clean Energy Fund announced earlier. I propose to levy a clean energy cess on coal produced in India at a nominal rate of Rs 50 per tonne," Finance Minister Pranab Mukherjee said while presenting Union Budget 2010-11.

"This cess will also apply to imported coal," he added.

After the last year's hike by Coal India (CIL), the domestic coal prices are currently hovering in the range of Rs 448-Rs 2,500 per tonne.

The National Clean Energy Fund, is being created to fund research and innovative projects in clean energy technologies, he added.

"There are many areas of the country where pollution levels have reached alarming proportions. While we must ensure that the principle of polluter pays remains the basic guiding criteria for pollution management, we must also give a positive thrust to development of clean energy," Mukherjee said.

Coal, he said, is the "mainstay of India's energy sector and 75 per cent of the power generation is currently coal based".

In its attempt to develop alternative sources of energy and reduce dependence on conventional sources like coal, the government is promoting solar and electric power.

"Harnessing renewable energy sources to reduce dependence on fossil fuels is now recognised as a credible strategy for combating global warming and climate change," Mukherjee added.

To implement the government's ambitious National Solar Mission among others, the minister proposed to slash customs duty, excise duty and service tax on various such projects.

"I propose to provide a concessional customs duty of 5 per cent to machinery, instruments, equipment and appliances etc required for the initial setting up of photovoltaic and solar thermal power generating units. I also propose to exempt them from Central Excise duty," Mukherjee said.

"I propose to exempt a few more specified inputs required for the manufacture of rotor blades for wind energy generators from Central Excise duty," he added.

Also, to promote the use of energy-saving appliances, Mukherjee reduced the excise duty on LED lights to 4 per cent from 8 per cent, at par with Compact Fluorescent Lamps (CFLs).

Among other things, the government levied "a nominal duty of 4 per cent" on electric vehicles and exempted some of their critical parts from the basic customs and special additional duties subject to actual user condition.

"These parts would also enjoy a concessional Counter Vailing Duty of 4 per cent," he added.