First energy meet mulls coal cess

At this meeting, Cabinet Secretary B.K. Chaturvedi put forward proposals for augmenting coal and gas supplies, while the Planning Commission presented a strategy paper on the energy sector.

On the Cabinet secretariat’s proposal dealing with short and long-term measures to ensure energy security for the country, concerns were raised on shortages of coal/gas and their likely impact on the power sector.

With respect to coal, it was pointed out that the low domestic price of coal vis-a-vis the international prices was a big deterrent for investments in the coal sector. While raising the domestic price of coal was one option, the other option put forward was to impose a cess.

Sources said that the money raised through this cess would be reploughed back into the sector and would not be used for other fiscal needs.

In addition to this, for the coal sector, the PM has asked the coal ministry to cancel the licenses of promoters who fail to utilise their captive coal mines. It was found that out of the 86 captive coal blocks that have a potential to generate 204 million tonnes of coal annually, only 9 MT of coal was produced in 2004-05.

On steps to augment gas supplies, the committee, of which Finance Minister P. Chidambaram is a member, also decided to exempt LNG from the five per cent customs duty. Added to this, it was also decided that state governments should not impose sales tax on LNG.

Interestingly, the PM asked the Cabinet secretary to expedite the Cabinet note to amend the shipping policy that requires ships to fly only Indian flags. This is has been a big impediment for companies that import coal and LNG and more than month back, the PM had asked both the shipping and the commerce ministry to sort out the issue and move a note for the Cabinet to take a decision on the matter.

However, this note is still to be moved.