Private power firms seek abolition of import duty on coal
February, 22nd 2012
With acute fuel shortage hurting projects, private power producers, including Reliance and Tatas, have asked the Finance Ministry to abolish five per cent duty on coal imported for power plants.
Presenting a slew of proposals to be considered for the 2012-13 Budget, the Association of Power Producers (APP) has also asked for customs duty exemption for various facilities such as coal transportation required for mega power projects.
"Imported non-coking coal for thermal power projects attracts five per cent customs duty... Request to issue an exemption notification to reduce the customs duty from five per cent to nil," APP said in a recent letter to Department of Revenue Secretary R S Gujral.
The private power producers noted that there is huge shortage of non-coking coal and without imported non-coking coal, it is very difficult to run the power plant.
"However, presently due to five per cent customs duty and also huge ocean freight logistics cost makes imported non-coking coal unviable and increasing the cost with imported coal as there is no alternate, it will be difficult for developers to supply power agreed PPA (Power Purchase Agreement) rate," the letter pointed out.
APP is a grouping of about 22 companies including Reliance Power, Tata Power, Lanco Infratech, Adani Power, Jindal Steel and Power. These entities account for over 95 per cent of power capacity in the private sector.
The country's power sector, which is expected to see a capacity addition of about 80,000 MW in the 12th Five-Year Plan, is grappling with various problems including acute fuel scarcity and spiralling coal prices.
A high-level delegation of executives of private power producers had met Prime Minister Manmohan Singh on January 18 to apprise him of the issues faced by the sector. Following this, a Committee of Secretaries (CoS) was set up.
On February 15, the Prime Minister's Office (PMO) said that Coal India would sign fuel supply pacts for power projects for a period of 20 years.
Meanwhile, APP has also sought waiver of withholding tax in case of External Commercial Borrowings.
Further, the association has said that companies venturing into power sector should be allowed to raise funds by issuing tax-free bonds.