In its Pre-budget Memorandum submitted to the Ministry of Finance, CII has requested the government to consider reduction in customs duty on non-coking coal.

Import of coking coal, mainly used by steel industry, is exempted from basic customs duty, whereas non-coking coal attracts basic customs duty of 5 per cent. In the budget 2011-12, Government had also imposed 5 per cent countervailing duty for which CENVAT credit can be availed by the manufacturer if its product attracts excise duty. In addition, clean energy cess of Rs 50 per tonne is applicable since 1st July 2010.

Power sector is one of the main consumer of non-coking coal and nearly two third of the power generation in the country is coal based. There is no excise duty on generation of electricity and consequently power sector cannot avail CENVAT credit for 5 per cent countervailing duty. High import duties on non-coking coal are resulting in increase in per unit production cost of electricity. Other sectors consuming non-coking coal are cement, paper and captive power generation plants. Non-coking coal is also used for steel making through COREX technology and sponge iron route.
 
Non-coking coal production in India is less than the requirement and consequently users have no option but to import coal at a higher cost.
 
CII has therefore asked for reduction of customs duty from 5 per cent to NIL on non-coking coal to give some relief to users.