Budget stresses need to cut reliance on coal imports

Finance minister P Chidambaram made a concerted effort to rationalise the price of imported coal by announcing equal duties for imports of both steam and bituminous types of coal.

The minister also called for adoption of a policy for blending the prices of domestic and imported coal under a public private partnership (PPP) with Coal India Ltd (CIL) as one of the partners.

"If the coal requirements of the existing power plants and the power plants that will come into operation by March 31, 2015 are taken into account, there is no alternative except to import coal and adopt a policy of blending and pooled pricing," Chidambaram said in his budget speech.

The minister announced a duty correction on two types of coal imports — the steam coal and bituminous coal.

"Since both types of coal are used in thermal power stations, there is rampant misclassification. I propose to equalise the duties on both kinds of coal and levy 2% customs duty and 2% counter-vailing duty (CVD)."

At present, steam coal is exempt from customs duty but attracts a concessional CVD of 1% while bituminous coal attracts a customs duty of 5% and a CVD of 6%.

Despite the country having abundant reserves of fossil fuel, "we continue to import large volumes of coal," said Chidambaram.

Coal imports, which shot up to 100 million tonnes from April to December of 2012, would further scale to 185 million tonnes by 2016-17, he said.

The minister said that the coal ministry would announce government’s policies in due course to device a PPP policy framework with CIL as one of the partners to increase coal production for supply to power producers and other consumers.

The minister added that the government has already approved a scheme for the financial restructuring of discoms to restore health of the power sector.