The Union Budget FY17 announced Increase in Clean Energy Cess by INR 200/MT which will directly rise power generation cost/unit further.
The Budget announcement with rise in Clean Cess on coal to INR 400/MT will hike Power generation cost in the country by 14-15 paise/unit which in turn will be passed directly on consumers as additional tariff by 4 paise/unit.
Government’s proposition to double the clean-energy cess on coal will put addition cost in coal prices also which may rise by 20% after this. While CIL, the state-run behemoth itself anticipating an impact of INR 5,000 crore.
[su_pullquote align=”right”]“’Clean Energy Cess’ levied on coal, lignite and peat has now been renamed as ‘Clean Environment Cess’, Finance Minister Arun Jaitley said in budget 2016-17.”[/su_pullquote]
However, rise in cost by 15 paise/unit may reduce the difference between cost of renewable power generation and thermal power generation. It will also generate an additional income of around INR 25,000 crore for the government.
The Budget announcement FY17 was highly focused on strengthening rural India, which will cause surge in demand for power this year.
Jayanta Roy, Head of coal from ICRA predicted that the coal cess will build expense of production for the aluminum sector by 2.5%, and for others such as iron in steel sector it would run between 0.5% to 0.8% ascents in production cost. However, the sponge iron industry, is anticipated to witness ascend of INR 280/MT production costs.
According to India Ratings, the modification on cess on coal will impact profits of such captive Power utilities like JSW, Tata Steel and SAIL etc.
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