Cess on coal cheer towards Clean Energy

Coal auction might see lower bids

In the Union Budget, for the second time in a row the cess on coal was doubled to Rs 200 per tonne. In his maiden budget in July 2014, Arun Jaitley increased it to Rs 100 per tonne from Rs 50 per tonne. The cess is collected as National Clean Energy Fund and is disbursed for renewable energy based initiatives and power projects.

The additional cess would fetch Rs 12,000 crore annually in the NCEF pool. The total amount in NCEF till yet is close to Rs 40,000 crore. The sad part however is that the disbursal of money is slow.

Officials in the ministry of new and renewable energy (MNRE) have however raised this concern on several occasions that the projects to be funded from NCEF are a huge waiting list. In the past three years of its existence, projects totalling Rs 12,000 crore were sanctioned to be funded through the money collected in NCEF but the ministry has received partial amount, in bits and parts.

Among the beneficiaries are solar power projects tendered under the National Solar Mission, 1,000 mw of solar power projects to come up in defence owned areas, subsidy for off-grid solar applications totalling Rs 1,500 crore and soft loans by IREDA to clean energy projects.

The heavy weight projects depending on NCEF for their funding are Rs 40,000 crore Green Energy Corridor project and to be launched National Wind Energy Mission, which will entail a total expenditure of Rs 18,000 crore.

Last year, interestingly, the annual budget of MNRE of Rs 1500 crore was also disbursed from NCEF. 

The flip side of the coal cess is that the ongoing auction of coal blocks might lead to bidders putting cautious price bids. The first phase of e-auction which ran from 14 to 23 February witnessed aggressive bids by companies eyeing coal for both power and unregulated steel, cement and iron sector.

The sector experts opined that doubling the cess would lead to change in the economics the bidders are referring to while bidding. The second phase of auction would start from 4 March and would see sector majors fight out with prior owners. Market experts said that the bids would be lower that first phase and fight would be quite close.