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An expert group on 'Low carbon strategies for inclusive growth' headed by former Planning Commission member Kirit Parikh, has recommended that cess be levied on all fossil fuels, to enable a low carbon-dependent society. The report argues the need to levy a tax similar to coal cess and use it for development of energy-efficient ways to generate power.
The report, has been given to the Planning Commission. In Union Budget 2014, the government increased the coal cess from Rs 50 a tonne to Rs 100 a tonne.
The group, which has experts from coal, power, oil & gas, renewable energy, environment and transport sectors, has compiled some key alternative low-carbon options, with an analysis of their cost-benefits and the enabling legislations required to operationalise the same.
The committee has suggested five policy instruments - energy pricing, carbon tax, cap & trade, subsidy, and regulation. Under these heads, the report has suggested measures such as market pricing of fuel, an appropriate structure for power sale, energy-efficiency standards, and purchase obligation on customers for demand-side management.
"The Expert Group recommends that we should, in the first instance, move as soon as possible to a domestically competitive market for fossil fuels and transfer targeted subsidies directly to the poor, through the best means available. This has been accepted, in principle, by the government. The movement towards market pricing, however, is slow, and the process needs to be accelerated without any further loss of time," the report notes.
This recommendation is in line with the suggestions made by the Vijay Kelkar committee looking into gas pricing, advocating market-determined pricing, with rates being fixed at the highest possible level.
Looking at the long-term viability of the power prices, the report favours a feed in tariff (FiT) model for the power sector, especially renewable energy. "FiT gives certainty to the plant owner whose cash inflows are predictable. This makes it easier to obtain finance and attain financial closure," says the report.
For demand-side management, the report suggests measures such as strict renewable purchase obligation, consumer awareness in energy use, and efficiency standards for the industry.
