India Tax On Coal Increases, Supposed To Help Fund Green Projects

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Originally published on Sustainnovate.

The Indian Ministry of Finance increased the tax on coal yet again and also expanded the scope of use of resulting revenue to finance environmental projects as well.

In the annual budget for financial year 2016-17, Arun Jaitley, the Indian Finance Ministerannounced that the clean energy cess on coal mined and imported in the country has been increased from Rs 200 ($2.94) to Rs 400 ($5.88) per tonne. The minister also stated that the revenue collected from this tax shall be put into the renamed Clean Environment Fund.

Earlier, the tax collected was earmarked for building renewable energy projects and transmission projects dedicated to carry electricity from renewable energy projects. The government is now planning to use this revenue to finance environmental projects, possibly including cleaning of rivers and the national cleanliness program.

A tax on coal was first introduced in 2010–2011, when Rs 50 per tonne of coal was levied on miners and importers. Since then, successive governments have gradually increased the cess considerably. While this move has been praised globally, the utilisation of the tax revenue has not been satisfactory.

There is no clarity on how prospective project developers can avail finance from the national clean energy fund. And while the government has stated in the past that the revenue shall be used to finance ultra mega solar power projects and possibly provide viability gap funding for solar power projects auctioned under the National Solar Mission, successive governments have faced criticism for allegedly planning to use this fund to control fiscal deficit.

Image by M (some rights reserved)