The coming Union budget could scrap the 5% import duty on
coal meant for power project, a move that will help meet demand for the fuel in
a country that is perennially short of it and where 70% of power is still
generated from it.
“The announcement will be made in the (Union) budget. Given
the coal shortage in the country, this step had to be taken,” said a senior
government official who spoke on condition of anonymity.
Indian energy producers consume 78% of the total domestic
output of coal.
“We have asked for it (the cut in duty) given the shortage
of coal in the country. We may get it,” added a senior power ministry official
who also did not want to be identified.
The size of the market for imported coal that goes into
power generation in India is around 80 million tonnes (MT) a year. The
demand-supply gap is expected to touch 450 mt by 2017, which is largely
expected to be met through imported coal. It takes around 5,000 tonnes of coal
to generate 1 megawatt of power.
“The import duty waiver is likely to bring relief to power
projects, particularly those… where the bid clauses restrict pass-through of
high imported coal costs to the power procurers. The cost of procurement of
imported coal has been high and is rising, and the import duty on a higher base
has led to a compounding effect,” said Dipesh Dipu, director at an audit and
consulting firm.
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