Luke warm initiatives for the coal sector in Union Budget.

Despite all the shrill about emerging coal shortage and ensuing power crunch the union budget gave cold shoulder to this sector with ambiguity writ large.

Sagging domestic production which is entangled in environment clearance and land acquisition has led to import escalation over the years. India imported about 100 million tonne of coal in the last 8 months (April-December) and the future looks ominous with  figure bloating to nearly 185 million tonne by the end of 12th Five Year Plan lest domestic production picks up.

Industry was expectant of affirmative policy initiatives to fast track project clearances and increased financial allocation. However amidst clamor for more sops to facilitate coal availability the budget gave a mild tweak by making ambiguous concerns about the often repeated malaise plaguing the industry.

Mere homilies in the form of advocating PPP as a panacea for the ills was a far cry from some surgical approach to ease the situation in short term . Leaving the ball in Coal Ministry’s court can be aptly termed as passing the buck.

To propel the sector he announced following policy changes

1. Equalization of import taxes on thermal coal

overseas purchases of steam and bituminous coal will attract a customs duty and a countervailing duty of 2% each. Steam coal had 1% countervailing duty and no customs tax, while bituminous coal had 5% customs tax and 6% countervailing duty

2. PPP mode for raising coal production

The public private partnership mode for raising coal to bridge the demand supply gap in coal, may help add around 60 million tonnes by 2016-17. Everything from land acquisition to getting regulatory clearances and following safety norms will remain the responsibility of the private sector partners of the CIL.

However one cannot gloss over the incremental hike in power tariff owing to import tariff equalization and freight hike by linking it to the oil price expected to increase the outflow by 5%. It will be ultimately borne by the power plants and buyers.

Till the time coal ministry comes out with specific policy announcement to address the problem it would be prudent to keep the fingers crossed.


Source : coalguru.com