GST to help clear Coal In­dia stocks

Resource Digest - - CONTENTS -

State-run Coal In­dia Ltd, sad­dled with mil­lions of tonnes of un­sold coal, is ex­pected to be the big­gest ben­e­fi­ciary of a con­tro­ver­sial govern­ment de­ci­sion to more than halve the lo­cal sales tax on the fuel af­ter a jump in lo­cal sup­plies.

The world's third -largest green­house gas emit­ting coun­try has said that it would lower the duty on do­mes­tic coal from July 1 and im­pose a new 18 per cent tax on so­lar cells and mod­ules as part of a broader tax over­haul. The moves are seen as help­ing boost sales of the fos­sil fuel mined lo­cally and used mainly in ther­mal power plants. But im­ports of high-qual­ity coal, which are scarce in In­dia, and used in the steel mak­ing process by com­pa­nies like Tata Steel, will be­come ex­pen­sive fol­low­ing the changes to the duty struc­ture.

The duty re­vamp un­der the na­tional goods and ser­vices tax (GST) may also hurt the young and boom­ing so­lar power in­dus­try, which re­lies heav­ily on cells and mod­ules im­ported from China.

Out­put by Coal In­dia Ltd, the world's largest coal miner which mainly pro­duces low-grade coal for power firms, has ex­panded rapidly as the govern­ment speeds up en­vi­ron­men­tal and other ap­provals as part of its ef­forts to pro­vide elec­tric­ity across the coun­try. How­ever, the highly in­debted power com­pa­nies strug­gled to match the same growth rates.

The govern­ment re­cently reined in coal out­put, cut­ting Coal In­dia Ltd's pro­duc­tion tar­get by about a tenth to 600 mil­lion tonnes (mt) for the cur­rent fi­nan­cial year. Coal In­dia Ltd hopes the low­er­ing of coal sales tax to 5 per cent from the cur­rent rate of around 11 per cent will help it find buy­ers for some 57 mil­lion tonnes of mined coal that it has been strug­gling to sell, a se­nior com­pany of­fi­cial said.

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