GST to help clear Coal India stocks

28 Jun 2017 12:14 PM GMT

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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