Power tariffs may rise up to 16 paise per unit while coal prices may go up by 20 per cent with the government today proposing doubling the clean energy cess to Rs 400 a tonne levied on coal, lignite and peat.
While presenting the budget for 2016-17, Finance Minister Arun Jaitley said that the 'Clean Energy Cess' levied on coal, lignite and peat has now been renamed as 'Clean Environment Cess'.
"Its incidence has been increased to Rs 400 per metric tonne, from Rs 200 per metric tonne," he said.
Commenting on the proposed cess, Manish Aggarwal, Partner and Head of Energy and Natural Resources, KPMG in India said, "While good from overall environment perspective, this goes against stated intent to reduce 'cost of power' to industry.
The per unit impact of additional increase would be roughly 12 to 16 paise per unit, he added.
Bharat Aluminium Co Ltd Non-Executive Chairman S K Roongta said that proposed hike in coal cess will increase the cost of power which will have to be passed on to consumers to that extent.
The cost of power may go up by about "10 paise per unit", Roongta said, adding that it will impact industry and general consumers.
According to PwC's Kameswara Rao, increase in carbon cess was expected as it was doubled in the last two years, but still well below the imputed cost of carbon.
"This would increase cost of power by an average 10 paise per kWh. But it would also enhance the funding available with the government for supporting renewable energy manufacturing and renewable power plants," Rao said.
Meanwhile, a Coal India official said that the cess is likely shoot up the PSU's average notified coal price by around 20 per cent.
"Our average coal price (notified segment) is Rs 1,000-1,100 per tonne and an increase of Rs 200 per tonne is almost 20 per cent rise in coal price," the official said.
Sources said that the impact of cess on power tariffs will be much more for south India power plants that procure mostly low-grade coal which is priced at Rs 700-800 per tonne from Mahanadi Coalfields.
This will be because the Rs 200 per tonne additional levy will jack up coal price by as high as 25 per cent, sources said.
Earlier, the government had increased the Clean Energy Cess from Rs 100 to 200 per tonne of coal to finance clean environment initiatives for 2015-16.