Power tariff may heat up with shift in coal royalty
Power tariffs are likely to go up further as the government is planning to revise royalty rates on coal, shifting it from the current specific rate to ad valorem system.
By Subhash Narayan & Rajeev Jayaswal, TNN |
NEW DELHI: Power tariffs are likely to go up further as the government is planning to revise royalty rates on coal, shifting it from the current specific rate to ad valorem system. It is also considering a proposal to allow states to levy up to 5% cess on coal over and above the royalty charges.
Once implemented, the proposals may push the overall coal prices by up to 25%, much to the discomfort of the power sector, the prime consumers of coal. It would, however, swell the states kitty by over Rs 500 crore.
The government is considering shifting to the new system of royalty where rates may be fixed between 20 and 22% of coal prices, an official source said adding that a note from the coal ministry specifying the changes would be put up before the cabinet for approval soon.
It is understood that a change in government’s proposal in favour of ad valorem royalty rates has come in the wake of strong support from the Energy Coordination Committee (ECC) headed by Prime Minister Manmohan Singh. A coal ministry committee on coal and lignite royalty had earlier suggested shifting royalty rates on coal to a mix of specific and ad valorem duties.
A report of Economic Advisory Council (EAC) of the Prime Minister headed by C Rangarajan had also favoured the move. Sources, however, said that under pressure from states, the ECC at its recent meeting also favoured advancing implementation of internationally-acceptable ad valorem royalty rates.
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The coal ministry would now revise the cabinet note to include both the options on royalty (mixed rate as well as ad valorem rate). It will now be up to the Cabinet to finalise the most appropriate option, the source said. It is understood that Centre may also permit states to levy a cess over and above the royalty with a permissible limit of 5%. Already states like West Bengal levy cess on coal. The proposal on cess would be implemented after a favourable opinion is given by the law ministry, sources said. The courts have already upheld states’ powers to levy cess over and above the royalty payable to them.
At present, the Centre fixes the rate of royalty on coal on per tonne basis for three years, which is payable to the state governments. As the rates were last revised in September 2002, a revision was due last year.
subhash.narayan@timesgroup.com
rajeev.jayaswal@timesgroup.com
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