It’s Pits: Coal power may cost more

NEW DELHI: The efforts to provide cheap power to the consumer may receive another setback with the government considering a proposal to impose cess on coal produced from open-cast mines. The move is aimed at funding the growth and development of underground mines in the country having potential for giving larger yields of coal.

Once implemented, the decision would mean the coal prices would increase again. The government recently increased the royalty rates on coal that has increased its price marginally. There is also a proposal to start competitive bidding for captive coal mines, a move that may also increase the price of the raw material.

The Energy Coordination Committee, headed by Prime Minister Manmohan Singh, has asked the coal ministry to constitute an inter-ministerial committee to look at various issues of incentivising underground mining, including levy of cess on open-cast production, an official source said.

While the level of cess is still being discussed, it may be fixed at 3-5% of the price of coal, the source added. The government is focusing on the development of underground mines as it has the potential to generate larger production as compared to open-cast ones. However, due to capital-intensive nature of these mines, its development has not progressed well in the country.

Of the total production of 360 million tonnes of coal annually by Coal India (CIL), the contribution from underground mines is a mere 46 million tonnes. In addition to the cess, the Energy Coordination Committee has considered a proposal to provide tax concessions and import duty concessions on capital equipment for promoting underground mining. An earlier proposal to grant infrastructure status of coal sector was, however, rejected by the finance ministry. A fresh proposal has been moved in this regard now.

The government is looking at incentivising and reforming coal sector operations in a bid to bridge the demand-supply mismatch. Even though the country has one of the largest reserves of coal, it imports coal for meeting all its requirements. The Planning Commission has estimated the coal demand-supply gap would be over 60 million tonnes by 2011-12 by when demand is expected to shoot up to 700 million tonnes.