According to a statement from the Ministry of Coal on Thursday, coal ranks among India's top five commodity imports by value, despite increased domestic production, particularly of low-quality coal with high ash content.
In their recommendations to the coal ministry, the panel of officials highlighted the need for a revision in the current carbon tax rate, which stands at 400 rupees ($4.83) per metric ton for all types of coal imports. They suggested implementing a tax based on the ad valorem principle, linking it directly to the coal's price and quality, as opposed to the fixed rate currently in place.
The panel emphasized the importance of adjusting the tax in a manner that maintains revenue neutrality to prevent any loss to the government treasury. Final decisions regarding taxes are made by India's finance ministry.
According to the panel's report, the existing tax structure disproportionately affects domestic coal sales and electricity tariffs. They argued that while utilities primarily rely on domestically sourced coal, other users, such as sponge iron manufacturers, opt for imported coal due to the tax disparity.
The report highlighted that the current tax system results in higher prices for domestically mined coal, despite its lower calorific value compared to imported coal with higher calorific value.
Despite record production by state-run Coal India, which contributes approximately 80% of domestic coal output, India's imports of thermal coal, used for power generation, increased by nearly 10% in 2023 to 176 million tons. Australia, Indonesia, and South Africa are the primary suppliers of thermal coal to India.
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