India Doubles Tax On Coal Again

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Broadly along expected lines, India has yet again increased the tax on coal mined or imported in the country.

On 29 February, the Indian Finance Minister tabled a budget proposal to double the tax on coal from Rs 200 (~US$3) to Rs 400 (~US$6) per tonne. This was the third instance, since it was introduced in July 2010, that the tax was doubled. Officially called the Clean Energy Cess, the tax was introduced by the United Progressive Alliance government and made effective from 1 July 2010.

The tax has now been renamed as the Clean Environment Cess. The fund that collects the revenue has also been renamed from the National Clean Energy Fund to the National Clean Environment Fund. The Government intends to use the revenue not just for renewable energy projects but also for environmental projects such as wildlife conservation and, very likely, afforestation and river cleaning projects.

Coal India Limited, the world’s largest coal mining company, is expected to significantly increase the quantity of coal mined every year and, thus, the revenue from Clean Environment Cess is also expected to increase sharply. Until December 2014 more than Rs 16,000 crore (US$2.4 billion) had been raised through the cess.

The Ministry of Finance has already announced a hike in budget allocation for Project Tiger – a wildlife conservation project – from the National Clean Environment Fund. With increased cess, the government has allocated Rs 300 crore (US$45 million), up from (US$25 million).

A large portion of the planned receipts from the cess are expected to be used for solar power projects. As part of the  target to have 100 GW solar power capacity installed by March 2022, the government plans to install around 40 GW capacity each through ultra mega solar power projects and rooftop solar power projects. These projects are expected to receive significant investment through the National Clean Environment Fund.

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An avid follower of latest developments in the Indian renewable energy sector.

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