ASSOCHAM Urges FM To Exempt Coal Imports From Customs Duty (30-Jan-2012)
India's premier apex chamber, Associated Chambers of Commerce and Industry of India (ASSOCHAM), has sought exception from basic customs duty and countervailing duty on thermal or steam coal from the finance ministry. In a communication to the ministry, ASSOCHAM secretary general D S Rawat has stated that the demand for coal far exceeds its supply and hence it needs to be imported in large quantities.
Thermal generation (coal, lignite and gas) of power still constitutes 65% of total generation capacity and domestic coal supply is just not sufficient to meet these requirements. Additionally, environment stipulations make it essential for coal companies to import high quality coal for blending with lower grades of indigenous coal.
Imposing customs duty not only raises the cost on imports but also has a cascading effect on the demand for all goods and services in the economy. Amid global recessionary trends, it is imperative that the Indian economy maintains a steady and accelerated rate of growth and for this the power sector has to play its legitimate and designated role. But this was hampered due to the high customs duties which lead to an increase in the power tariff by 25 paise per unit, and go against the basic tenets of ensuring long-term fuel sustainability and energy security.
Imported coal is subject to imposition of 7.55% customs duty for imports from Indonesia and 10.83% for imports from other countries. In addition, there is countervailing duty of 5%. This distorts the field in favour of domestic coal based projects and discourages investments in imported coal based projects, threatening shortages. Moreover, risk profiles of independent power producers are adversely affected due to volatility in prices of imported coal, unpredictable long-term pricing arrangements, instability in shipping and exchange rates, logistical and infrastructural constraints for moving imported coal from ports to power stations.
ASSCHOM suggested that to bridge the gap in demand and supply, emphasis should be on importing thermal coal or acquiring new mines abroad. It has further predicted that shortage of domestic coal is likely to continue to persist over the medium term as the additional coal generation programme is not likely to catch up with the growing demands of capacity addition to align with economic growth targets.
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